
[Federal Register Volume 79, Number 21 (Friday, January 31, 2014)]
[Notices]
[Pages 5479-5481]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-01962]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71402; File No. SR-CBOE-2014-006]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change to Amend the Bylaws of its Parent Company

January 27, 2014.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on January 17, 2014, Chicago Board Options Exchange, Incorporated 
(the ``Exchange'' or ``CBOE'') filed with the Securities and Exchange 
Commission (the ``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 amend the bylaws of its parent company, 
CBOE Holdings, Inc. (``CBOE Holdings''). The text of the proposed rule 
change is available on the Exchange's Web site (http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), at the Exchange'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, 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
    The Exchange is proposing to make certain amendments to the Bylaws 
(the ``Bylaws'') of its parent company, CBOE Holdings, Inc. (``CBOE 
Holdings'') to make improvements in its governance. Currently, CBOE 
Holdings' Bylaws provide that ``when a quorum is present at any 
meeting, a plurality of the votes properly cast for the election of 
directors shall be sufficient to elect directors.'' This applies to 
both contested and uncontested elections. The Exchange proposes to 
change the manner in which uncontested elections occur. Specifically, 
the Exchange is proposing to move from a plurality voting standard to a 
majority voting standard for uncontested elections where ``each nominee 
for director shall be elected to the Board of Directors if a majority 
of the votes properly cast are in favor of such nominee's election 
(i.e., if the number of votes properly cast ``for'' a nominee's 
election exceeds the number of votes properly cast ``against'' that 
nominee's election); provided, however, that, if, as of the last date 
by which stockholders of the Corporation may submit notice to nominate 
a person for election as a director pursuant to Section 2.11 of these 
Bylaws or pursuant to any rule or regulation of the Securities and 
Exchange Commission, the number of nominees for director exceeds the 
number of directors to be elected at any such meeting (a ``Contested 
Election''), a plurality of the votes properly cast for the election of 
directors shall be sufficient to elect directors.'' As such, there will 
be no change to the voting process for contested elections.
    Under the majority voting standard that will apply to uncontested 
elections, a nominee who fails to receive the requisite vote would not 
be duly elected to the Board; however, because a director holds office 
until his or her successor is duly elected and qualified, any incumbent 
director-nominee who fails to receive the requisite vote does not 
automatically cease to be a director. Instead, such director continues 
as a ``holdover director'' until such director's death, resignation or 
removal, or until his or her successor is duly elected and qualified. 
For this reason, the majority voting standard under consideration 
requires 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 a majority of the votes properly cast in 
favor of such nominee's election and the Board's acceptance of the 
resignation.\3\ The Exchange is proposing to amend the language in 
Section 3.4 of the Bylaws to delete the statement that a resignation, 
unless specifically contingent upon its acceptance, will be effective 
as of its date or of the date specified therein, and replace that 
language with the statement that a resignation ``will be effective when 
delivered unless the resignation specifies a later effective date or an 
effective date determined upon the happening of an event or events.'' 
This would allow Directors to submit resignations that are contingent 
upon both the Director not receiving majority vote in an uncontested 
election and the Board accepting such resignation (or some other event 
that could lead to the Director no longer intending to act as a 
Director at some point in the future due

[[Page 5480]]

to the occurrence of some future event). After a director's failure to 
receive the majority of properly cast votes, CBOE Holdings' Nominating 
& Governance Committee then considers the resignation offer and 
recommends to the CBOE Holdings Board of Directors regarding whether to 
accept it. Within 90 days after the certification of the election 
results, the Board of Directors will decide whether to accept or reject 
the resignation. Promptly thereafter, the Board will announce its 
decision by means of a press release.
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    \3\ Pursuant to the ``Board Election Process'' section of CBOE 
Holdings' Corporate Governance Guidelines (available at http://ir.cboe.com/documentdisplay.cfm?DocumentID=7090).
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    Additionally, the Exchange is proposing some non-substantive 
changes to Section 3.2 of the Bylaws for added clarity. For example, 
the term ``Board'' is being replaced with ``Board of Directors'' in two 
places to add clarity. Also, the phrase ``Directors will serve one-year 
terms ending on the annual meeting following the meeting at which such 
directors were elected or at such time as their successors are elected 
or appointed and qualified. . .'' is being replaced with ``Directors 
shall be elected annually and shall hold office until the next annual 
meeting and until such time as their successors are elected or 
appointed and qualified'' to avoid confusion regarding the term length 
and to clarify until when elected directors hold office. This change 
will clarify that terms are not necessarily for one year, but until the 
next annual meeting (which may not be exactly one year from the date of 
the previous meeting), and that there may be holdover directors until 
their successors are elected or appointed and qualified (except in the 
event of earlier death, resignation or removal).
    As CBOE Holdings is listed on the NASDAQ Stock Market, these 
proposed changes are not inconsistent with the NASDAQ listing rules.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act and the rules and regulations thereunder applicable to the 
Exchange and, in particular, the requirements of Section 6(b) of the 
Act.\4\ Specifically, the Exchange believes the proposed rule change is 
consistent with the Section 6(b)(5) \5\ requirements that the rules of 
an exchange be 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. 
Additionally, the Exchange believes the proposed rule change is 
consistent with the Section 6(b)(5)\6\ requirement that the rules of an 
exchange not be designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
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    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(5).
    \6\ Id.
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    In particular, for purposes of an uncontested election, the 
proposed amendments adopt a majority vote standard for director 
elections for the Exchange's parent company, which would enable its 
directors to be elected in a manner that the Board of Directors 
believes is reflective of the desires of shareholders and provide a 
mechanism to protect against the election of directors by less than the 
majority vote of the shareholders.
    The proposed rule change to amend CBOE Holdings' Bylaws to adopt a 
majority vote standard for uncontested elections is consistent with the 
Act because the proposed change is designed to allow the members of the 
Board of Directors to be elected in a manner that the Board of 
Directors believes closely reflects the desires of its shareholders (as 
well as a manner in which uncontested Board of Director elections are 
conducted for the majority of large public companies in the United 
States), while also providing a process for addressing the circumstance 
when a director fails to receive a majority of the votes in an 
uncontested election. The plurality standard would continue to apply in 
contested elections.
    The proposed non-substantive changes to the Bylaws are intended to 
enhance clarity and prevent confusion, thereby removing impediments to 
and perfecting the mechanism of a free and open market and a national 
market system, and, in general, protecting investors and the public 
interest.

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 that is not necessary or appropriate 
in furtherance of the purposes of the Act. The proposed change does not 
impact either intermarket or intramarket competition, but instead is 
intended to enhance the governance of the Exchange's parent company.

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

    The Exchange neither solicited nor received comments on the 
proposed rule change.

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 \7\ and Rule 19b-4(f)(6) thereunder.\8\ 
Because the foregoing proposed rule change does not: (1) Significantly 
affect the protection of investors or the public interest; (2) impose 
any significant burden on competition; and (3) become operative for 30 
days from the date on which it was filed, or such shorter time as the 
Commission may designate, it has become effective pursuant to Section 
19(b)(3)(A) of the Act \9\ and Rule 19b-4(f)(6) \10\ thereunder. At any 
time within 60 days of the filing of the 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. If the Commission takes such 
action, the Commission will institute proceedings to determine whether 
the proposed rule change should be approved or disapproved.
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    \7\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \8\ 17 CFR 240.19b-4(f)(6).
    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires the Exchange to give the Commission written notice of the 
Exchange's 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 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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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 email to rule-comments@sec.gov. Please 
include File Number SR-CBOE-2014-0006 on the subject line.

Paper Comments

[[Page 5481]]

     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-2014-006. This 
file number should be included on the subject line if email 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 Sreet NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 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-CBOE-2014-006 and should be 
submitted on or before February 21, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary,
[FR Doc. 2014-01962 Filed 1-30-14; 8:45 am]
BILLING CODE 8011-01-P


