
[Federal Register Volume 76, Number 222 (Thursday, November 17, 2011)]
[Notices]
[Pages 71411-71413]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-29674]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65728, File No. SR-BATS-2011-035]


 Self-Regulatory Organizations; BATS Exchange, Inc.; Order 
Approving Proposed Rule Change, as Modified by Partial Amendment No. 1, 
To Amend and Restate the Amended and Restated Bylaws of BATS Global 
Markets, Inc.

November 10, 2011.

I. Introduction

    On September 7, 2011, BATS Exchange, Inc. (``BATS'' or 
``Exchange'') 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 of the Exchange's sole 
stockholder, BATS Global Markets, Inc. (``Corporation''), in connection 
with the Corporation's anticipated initial public offering of shares of 
its Class A Common Stock (the ``IPO''). The proposed rule change was 
published for comment in the Federal Register on September 26, 2011.\3\ 
On November 3, 2011, the Exchange filed Partial Amendment No. 1 to the 
proposed rule change.\4\ The Commission received no comment letters 
regarding the proposal. This order approves the proposed rule change, 
as modified by Partial Amendment No. 1.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 65353 (September 19, 
2011), 76 FR 59472 (September 26, 2011) (``Notice'').
    \4\ Partial Amendment No. 1 corrects an inconsistency between 
the Third Amended and Restated Certificate of Incorporation of the 
Corporation and the Corporation's proposed amended bylaws concerning 
actions of stockholders without a meeting. This is a technical 
amendment and is not subject to notice and comment as it does not 
materially affect the substance of the rule filing.
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II. Description of the Proposal

    On May 13, 2011, the Corporation filed a registration statement on 
Form S-1 with the Commission to register shares of Class A common stock 
and to disclose its intention to conduct an IPO offering those shares 
and to list those shares for trading on the Exchange. In connection 
with its IPO, the Exchange filed this proposed rule change to amend and 
restate the Corporation's current Bylaws and adopt these changes as its 
Second Amended and Restated Bylaws (``New Bylaws''). The proposal would 
primarily amend and restate various provisions of the Bylaws in a 
manner that the Exchange believes

[[Page 71412]]

would reflect changes to conform with provisions that are more 
customary for publicly-owned companies and also conform the New Bylaws 
to the Corporation's Certificate of Incorporation.\5\
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    \5\ See Notice, supra note 3, 76 FR at 59473. The Exchange also 
filed a proposed rule change to amend the Corporation's Certificate 
of Incorporation in anticipation of its upcoming IPO, which proposed 
rule change was recently approved by the Commission. See Securities 
Exchange Act Release No. 65646 (October 27, 2011), 76 FR 67783 
(November 2, 2011) (SR-BATS-2011-033) (order approving proposed rule 
change to amend and restate the Second Amended and Restated 
Certificate of Incorporation of BATS Global Markets, Inc.).
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A. Stockholders Meetings and Actions Without a Meeting

    The Exchange has proposed to revise the current Bylaw procedures to 
require stockholders to make certain disclosures and representations in 
notices to the Corporation concerning business proposals and director 
nominations to be considered at annual meetings.\6\ In addition, the 
Exchange would require that all proposals and nominations comply with 
applicable requirements of the Act.\7\ The Exchange has represented 
that the purpose of the disclosure and representation requirements is 
to assure that stockholders asked to vote on stockholder proposals or 
nominations are more fully informed and are able to consider any 
proposals or nominations along with the interests of those stockholders 
or the beneficial owners on whose behalf such proposal or nomination is 
being made.\8\
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    \6\ See proposed Section 2.02 of the New Bylaws. The New Bylaws 
also state that such notice requirements would be satisfied if done 
in compliance with Exchange Act Rule 14a-8. See Notice, supra note 
3, 76 FR at 59474. Additionally, the New Bylaws requires 
stockholders to appear at any meeting to present such proposals or 
nominations. See id.
    \7\ See Notice, supra note 3, 76 FR at 59474.
    \8\ See id.
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    In addition, the Exchange has proposed that the New Bylaws would 
only permit a special meeting of the stockholders to be called by the 
board of directors pursuant to a resolution adopted by a majority of 
the board of directors.\9\ The Exchange has also proposed to revise 
certain notice requirements with respect to written consent from 
stockholders to approve certain corporate actions taken without a 
meeting.\10\ Additionally, the Exchange has proposed to prohibit any 
action by written consent following a change of ownership, except as 
provided in the Corporation's Certificate of Incorporation.\11\ The 
Exchange notes that these provisions are designed to prevent any 
stockholder from exercising undue control over the operation of the 
Exchange by circumventing the board of directors of the Corporation 
through a special meeting of the stockholders or action by written 
consent.\12\
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    \9\ See proposed Section 2.03 of the New Bylaws. Under the 
current Bylaws, a special meeting of the stockholders could be 
called by the chairman of the board of directors, chief executive 
officer, the majority of the board of directors, or by the 
stockholders entitled to vote at least ten percent of the votes at 
the meeting. The Exchange also proposed that, whenever preferred 
stockholders have the right to elect directors, the preferred 
stockholders may call a special meeting of preferred stockholders 
pursuant to a resolution of the board. See id.
    \10\ See proposed Section 2.10 of the New Bylaws.
    \11\ See Notice, supra note 3, 76 FR at 59474 n. 4 (defining a 
``Change of Ownership'' as occurring at such time as the beneficial 
owners of the Class B Common Stock and Non-Voting Class B Common 
Stock own, in the aggregate, less than a majority of the total 
voting power of the Corporation) and Partial Amendment 1.
    \12\ See Notice, supra note 3, 76 FR 59474.
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B. Board of Directors and Board Committees

    The Exchange has proposed changing the current Bylaws to revise the 
process to remove directors and board committees. The proposed rule 
change would allow the board of directors or any director to be removed 
by the affirmative vote of at least a majority of voting power of all 
outstanding shares of the Corporation.\13\ The Exchange has represented 
that the purpose of this change is to align these requirements with 
Delaware General Corporation Laws.\14\ The Exchange also has proposed 
to eliminate references to executive committees, to authorize the board 
of directors to create committees, and, so as to ensure that the full 
board of directors considers significant corporate decisions, to 
prohibit board committees from (i) Approving, adopting, or recommending 
to stockholders any matter required by Delaware law to be submitted for 
stockholder approval or (ii) adopting, amending, and repealing the New 
Bylaws.\15\
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    \13\ See proposed Section 3.05 of the New Bylaws.
    \14\ See Notice, supra note 3, 76 FR at 59474.
    \15\ See proposed Section 3.10 of the New Bylaws.
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    Currently, the Corporation's Bylaws provide that either the board 
of directors or shareholders may adopt, amend, or repeal the Bylaws of 
the Corporation. The proposal would modify this provision so that, upon 
a Change in Ownership,\16\ stockholders may only adopt, amend, or 
repeal the New Bylaws upon the affirmative vote of at least 70% of the 
total voting power of all outstanding shares of the Corporation.\17\
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    \16\ See supra note 11.
    \17\ See generally proposed Section 2.10 of the New Bylaws.
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C. Other Amendments

    The proposal will also amend and restate various other provisions 
such as those relating to the registered office of the Corporation,\18\ 
shares held by the Corporation in a fiduciary capacity,\19\ form of 
stock certificates,\20\ loans to officers,\21\ and indemnification of 
directors,\22\ among others.
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    \18\ See Notice, supra note 3, 76 FR at 59473.
    \19\ The Exchange also has proposed that any shares of stock 
held by the Corporation would have no voting rights, except when 
such shares are held in a fiduciary capacity. See proposed Section 
2.07 of the New Bylaws.
    \20\ See Notice, supra note 3, 76 FR at 59475.
    \21\ See id.
    \22\ See id.
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III. Discussion

    After careful review of the proposal, the Commission finds that the 
proposed rule change is consistent with the requirements of the Act and 
the rules and regulations thereunder applicable to a national 
securities exchange.\23\ In particular, the Commission finds that the 
proposal is consistent with Section 6(b)(1) of the Act,\24\ which 
requires a national securities exchange to be so organized and have the 
capacity to carry out the purposes of the Act and to enforce compliance 
by its members and persons associated with the provisions of the Act.
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    \23\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \24\ 15 U.S.C. 78f(b)(1).
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    The Exchange has represented that the proposed rule change relates 
solely to the Bylaws of the Corporation and that the Exchange will 
continue to be governed by its existing certificate of incorporation 
and by-laws.\25\ The Exchange also has represented that the Corporation 
will continue to directly and solely hold the stock in, and voting 
power of, the Exchange and that the Exchange will continue to operate 
pursuant to its existing governance structure.\26\ The Commission also 
notes that the Exchange does not propose any new substantive changes to 
Article 12 of the current Bylaws (relating to SRO Functions of BATS 
Exchange, Inc. and BAT-Y Exchange, Inc.).
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    \25\ See Notice, supra note 3, 76 FR at 59473.
    \26\ See id.
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    The Commission, therefore, believes that the proposed rule change 
is consistent with Section 6(b)(1) of the Exchange Act, which requires 
the Exchange to have the ability to be so organized as to have the 
capacity to carry out the purposes of the Act and to comply, and to 
enforce compliance by its members and persons associated with its 
members, with provisions of the

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Act, the rules and regulations thereunder, and the rules of the 
Exchange.\27\
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    \27\ 15 U.S.C. 78f(b)(1).
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\28\ that the proposed rule change (SR-BATS-2011-035), as modified 
by Partial Amendment No. 1, be, and hereby is, approved.
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    \28\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\29\
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    \29\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-29674 Filed 11-16-11; 8:45 am]
BILLING CODE 8011-01-P


