
[Federal Register Volume 81, Number 101 (Wednesday, May 25, 2016)]
[Notices]
[Pages 33283-33284]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-12396]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77876; File No. SR-MIAX-2016-08]


Self-Regulatory Organizations; Miami International Securities 
Exchange LLC; Order Granting Approval of Proposed Rule Change to Amend 
the Exchange's Amended and Restated By-Laws Relating to the Removal of 
a Board Restriction

May 20, 2016.

I. Introduction

    On March 29, 2016, Miami International Securities Exchange LLC (the 
``Exchange'' or ``MIAX'') filed with the Securities and Exchange 
Commission (the ``Commission''), pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934

[[Page 33284]]

(``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to 
amend the Exchange's Amended and Restated By-Laws (``By-Laws'') in 
order to remove a restriction prohibiting a Director, Observer or 
committee member of the Exchange's Board of Directors (``Board'') from 
simultaneously serving as a member of the governing body of a 
competitor. The proposed rule change was published for comment in the 
Federal Register on April 8, 2016.\3\ The Commission received no 
comments on the proposed rule change. This order approves the proposed 
rule change.
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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. 77507 (April 4, 
2016), 81 FR 20716 (April 8, 2016) (``Notice'').
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II. Description of the Proposed Rule Change

    Currently, the By-Laws restrict an individual who is a Director,\4\ 
Observer,\5\ or committee member of the Exchange from also serving as a 
member of the board of directors or similar governing body of a 
``Specified Entity.'' The term ``Specified Entity'' generally refers to 
any U.S. securities option exchange (or facility thereof) or U.S. 
alternative trading system on which securities options are traded which 
competes with the Exchange.\6\ The By-Laws specify that upon any 
individual who is a Director, Observer, or committee member of the 
Exchange becoming a member of the board of directors or similar 
governing body of a Specified Entity, such individual immediately would 
cease being a Director, Observer or committee member, as applicable, of 
the Board (``Board Restriction'').\7\
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    \4\ The term ``Director'' means the persons elected or appointed 
to the Board from time to time in accordance with the LLC Agreement 
of the Exchange and the By-Laws in their capacity as managers of the 
Exchange. See By-Laws, Article I (j).
    \5\ The term ``Observer'' means a person invited to attend 
meetings of the Board in a nonvoting observer capacity as further 
described in Article II, Section 2.2(g)(i)-(iii) of the By-Laws. See 
By-Laws, Article II, Section 2.2(g).
    \6\ Specifically, the term ``Specified Entity'' is defined in 
the By-Laws to mean (i) any U.S. securities option exchange (or 
facility thereof) or U.S. alternative trading system on which 
securities options are traded (other than the Exchange or any of its 
affiliates) that lists for trading any option contract that competes 
with an Exchange Contract, (ii) any person that owns or controls 
such U.S. securities option exchange or U.S. alternative trading 
system, and (iii) any affiliate of a person described in clause (i) 
or (ii) above. See By-Laws, Article I (oo).
    \7\ The Board Restriction was adopted by the Exchange in 2014. 
See Securities Exchange Act Release Nos. 71172 (December 23, 2013), 
78 FR 79530 (December 30, 2013); and 71541 (February 12, 2014), 79 
FR 9572 (February 19, 2014) (SR-MIAX-2013-58).
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    The Exchange states that the Board Restriction was added to the By-
Laws in connection with the Equity Rights Program (``ERP''),\8\ and was 
intended to prevent potential conflicts of interest that might arise 
due to an Exchange Director, Observer or committee member also serving 
a similar role on the governing body of a competitor.\9\ As more fully 
described in the Notice, the Exchange now proposes to amend the By-Laws 
to eliminate the Board Restriction.\10\ The Exchange states that it has 
found the Board Restriction to be unnecessarily restrictive, that it 
unduly limits the availability of qualified candidates from serving on 
the Exchange Board (or other governing body), and that the potential 
conflicts of interest that the restriction was designed to address can 
be more effectively and more efficiently addressed by other means.\11\
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    \8\ Pursuant to the ERP, units representing the right to acquire 
equity in the Exchange's parent holding company, Miami International 
Holdings, Inc., were issued to participating Members in exchange for 
payment of an initial purchase price or the prepayment of certain 
transaction fees and the achievement of certain liquidity addition 
volume thresholds on the Exchange over a fixed period of time. The 
By-Laws were also then amended to incorporate rights granted to 
Members participating in the ERP to appoint representation on the 
MIAX Board. See Securities Exchange Act Release No. 70498 (September 
25, 2013), 78 FR 60348 (October 1, 2013) (SR-MIAX-2013-43) and 
Securities Exchange Act Release No. 71172 (December 23, 2013), 78 FR 
79530 (December 30, 2013) (SR-MIAX-2013-58).
    \9\ See Notice, supra note 3, at 20717.
    \10\ Specifically, the Exchange proposes to remove the last 
sentence of Article II, Section 2.2(d), Article II, Section 
2.2(g)(ii), and Article IV, Section 4.2(b) regarding the Board 
Restriction, and remove the defined terms ``Exchange Contract'' and 
``Specified Entity,'' set forth in Article I (p) and (oo), 
respectively, which are used only in connection with the Board 
Restriction. See Notice, supra note 3, at 20717-18.
    \11\ See Notice, supra note 3, at 20717.
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III. Discussion and Commission Findings

    After careful review, 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 
and, in particular, with Section 6(b) of the Act.\12\ In particular, 
the Commission finds that the proposal is consistent with Section 
6(b)(1) of the Act,\13\ which requires that an exchange be organized 
and have the capacity to be able 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 the provisions of the Act, the rules 
and regulations thereunder, and the rules of the Exchange.
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    \12\ 15 U.S.C. 78f(b). 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).
    \13\ 15 U.S.C. 78f(b)(1).
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    The Exchange represents that its proposed removal of the Board 
Restriction from the By-Laws is designed to enable MIAX to engage the 
best suited and most qualified leaders to serve in the capacity of 
Director, Observer or committee member of the Exchange and will 
facilitate a Board structure and composition that will strengthen the 
Exchange's ability to comply with the provisions of the Act and enforce 
compliance by its members with the provisions of the Act. The Exchange 
also notes that most of its competing option exchanges do not restrict 
their board members from sitting on the board of directors or other 
governing body of another options exchange.\14\ Further, the Commission 
notes that it has previously considered and approved the Exchange's 
Board structure without the Board Restriction, and determined that the 
Exchange's governance provisions were designed to enable the Exchange 
to carry out its functions and responsibilities under the Act.\15\ For 
these reasons, the Commission finds that the proposed rule change is 
consistent with the Act.
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    \14\ See Notice, supra note 3, at 20717.
    \15\ See Securities Exchange Act Release No. 68341 (December 3, 
2012), 77 FR 73065, 73070 (December 7, 2012) (File No. 10-207) 
(order approving MIAX's application for registration as a national 
securities exchange).
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\16\ that the proposed rule change (SR-MIAX-2016-08) be, and hereby 
is, approved.
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    \16\ 15 U.S.C. 78f(b)(2).
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    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).

Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-12396 Filed 5-24-16; 8:45 am]
BILLING CODE 8011-01-P


