
[Federal Register Volume 81, Number 137 (Monday, July 18, 2016)]
[Notices]
[Pages 46723-46724]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-16853]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78293; File No. SR-CBOE-2016-047]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Order Approving a Proposed Rule Change Relating to Senior 
Management Authority

July 12, 2016.

I. Introduction

    On May 23, 2016, Chicago Board Options Exchange, Incorporated 
(``CBOE'' 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 its Bylaws and Rules 
with respect to delegations of certain authorities to senior 
management. The proposed rule change was published for comment in the 
Federal Register on June 7, 2016.\3\ The Commission received no 
comments on the proposal. This order approves the proposed rule change.
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    \9\ 17 CFR 200.30-3(a)(12).
    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 77962 (June 1, 
2016), 81 FR 36641 (June 7, 2016) (``Notice'').
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II. Description of the Proposed Rule Change \4\
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    \4\ A more detailed description of the proposed rule change 
appears in the Notice. See id.
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    The Exchange proposes to update references to senior management 
contained in its Bylaws and Rules to more accurately reflect roles and 
responsibilities within its current senior management structure. The 
Exchange notes that historically the CBOE Chairman of the Board also 
held the title of Chief Executive Officer (``CEO''). Currently, 
however, the titles of Chairman of Board, CEO, and President are held 
by three different individuals. As such, the Exchange proposes to amend 
its rules relating to authorities delegated to senior management to 
more accurately reflect the current senior management structure.

A. References to Chairman of the Board

    First, the Exchange proposes to amend Rule 2.15 (Divisions of 
Exchange), Rule 4.10 (Other Restrictions on Trading Permit Holders), 
Rule 6.17 (Authority to Take Action Under Emergency Conditions), Rule 
10.2 (Contracts of Suspended Trading Permit Holders), and Rule 16.1 
(Imposition of Suspension) to eliminate references to ``Chairman of the 
Board'' and replace those references with ``Chief Executive Officer.'' 
\5\ The Exchange notes that the CEO's responsibility is that of general 
charge and supervision of the business of the Corporation, whereas the 
Chairman of the Board's responsibility is that of the presiding officer 
at all meetings of the Board and stockholders, as well as of other 
powers and duties as are delegated by the Board.\6\ The Exchange 
believes the responsibilities currently delegated to the Chairman of 
the Board under Rules 2.15, 4.10, 6.17, 10.2 and 16.1 pertain to the 
general charge and supervision of the Exchange's business and therefore 
fall within the scope of the CEO's stated responsibilities, instead of 
the Chairman of the Board's.\7\
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    \5\ See Notice, supra note 3, at 36644.
    \6\ See id.; see also Sections 3.6 and 5.2 of the CBOE Bylaws.
    \7\ See Notice, supra note 3, at 36644.
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B. Office of the Chairman

    Second, the Exchange proposes to eliminate the term ``Office of the 
Chairman'' (``OOC'') in Rule 4.10 (Other Restrictions on Trading Permit 
Holders) and Rule 18.31 (Awards) and replace these references with 
``Chief Executive Officer or President.'' \8\ The Exchange notes that 
historically, the OOC was considered to be the management committee of 
the Exchange and consisted of the Chairman of the Board (who at the 
time was also the CEO), the Vice-Chairman (which role no longer exists) 
and the President.\9\ As the Exchange's senior management structure has 
since changed, the Exchange proposes to eliminate the references to the 
OOC in its rules. In its place, the Exchange proposes that the powers 
and responsibilities delegated to the OOC as a whole will now be 
delegated to either the CEO or the President. The Exchange believes the 
authorities delegated in Rules 4.10 and 18.31 fall more squarely within 
the scope of the CEO's or President's roles and responsibilities.\10\
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    \8\ See id.
    \9\ See id.
    \10\ See id.
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    Third, the Exchange proposes to eliminate the reference to the OOC 
in Section 6.1 (Advisory Board) of the Exchange's Bylaws and replace it 
with a reference to ``management.'' \11\ Section 6.1 currently provides 
that the Board will establish an Advisory Board which shall advise the 
Board and the Office of the Chairman regarding matters of interest to 
Trading Permit Holders (``TPHs''). The Exchange notes that the Advisory 
Board's Charter provides that the Advisory Board shall advise the Board 
and ``management'' regarding matters of interest to TPHs.\12\ In order 
to conform the language in Section 6.1 to the Advisory Board Charter, 
the Exchange proposes to replace the reference to the OOC with 
management.\13\
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    \11\ See id.
    \12\ See id.
    \13\ See id. Additionally, the title of the Bylaws will be 
changed to Seventh Amended and Restated Bylaws of CBOE. See id.
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C. Designee of the President

    Last, the Exchange proposes to amend Rules 4.14 (Liquidation of 
Positions) and 6.20 (Admission to and Conduct on the Trading Floor; 
Trading Permit Holder Education) to provide that in addition to the 
President, a designee of the President may act pursuant to the 
authorities delegated by those Rules.\14\ The Exchange notes that 
allowing such authorities to also be delegated to a designee of the 
President provides additional flexibility and certainty that if the 
President were unavailable, an alternate Exchange official could carry 
out the designated responsibilities of the President if needed.\15\
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    \14\ See id.
    \15\ See Notice, supra note 3, at 36645.
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III. Discussion and Commission Findings

    The Commission finds that 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.\16\ Specifically, the Commission believes the proposed rule change 
is consistent with the Section 6(b)(5) \17\ 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

[[Page 46724]]

system, and, in general, to protect investors and the public interest.
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    \16\ 15 U.S.C. 78f(b).
    \17\ 15 U.S.C. 78f(b)(5).
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    In particular, the Commission believes the proposed rule change 
will remove impediments to, and perfect the mechanism of a free and 
open market and a national market system, and, in general, will protect 
investors and the public interest by updating the delegation of 
authority to senior management under certain of the Exchange's Rules, 
which should facilitate the Exchange's ability to operate and carry out 
its self-regulatory responsibilities. In particular, the proposed rule 
changes to amend Rules 2.15, 4.10, 6.17, 10.2, and 16.1 to replace the 
references to the Chairman of the Board with the CEO should update and 
clarify which Exchange official is vested with the authorities 
established in those rules. The Exchange represents that while 
historically the Chairman of the Board also held the title of CEO, 
currently, the two titles are held by different individuals.\18\ The 
Exchange Bylaws confer different responsibilities on the Chairman of 
the Board and the CEO.\19\ These proposed rule changes will ensure that 
the authorities delegated pursuant to Rules 2.15, 4.10, 6.17, 10.2, and 
16.1 are consistent with the roles and responsibilities established in 
the Bylaws.
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    \18\ See Notice, supra note 3, at 36644.
    \19\ See id.
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    Similarly, the proposed rule changes to amend Rules 4.10 and 18.31 
and Section 6.1 of the Bylaws to remove references to the OOC will 
reduce confusion by eliminating references to a term the Exchange 
believes is antiquated. The Exchange notes that historically the OOC 
consisted of the Chairman of the Board (who also was the CEO), the 
Vice-Chairman, and the President.\20\ Currently, however, the Chairman 
of the Board no longer holds the title of CEO and as such does not bear 
responsibility for the CEO's functions.\21\ In addition, the Exchange 
has eliminated the role of Vice-Chairman.\22\ As such, the proposed 
rule changes to replace the references to the OOC in Rules 4.10 and 
18.31 with references to the CEO or President will remove an outdated 
term, ensure that delegated authorities are consistent with the roles 
and responsibilities delineated in the Bylaws, and will clarify that 
the authorities in those rules are delegated solely to the CEO or 
President.
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    \20\ See id.
    \21\ See id.
    \22\ See id.
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    Likewise, the Exchange's proposal to eliminate the reference to the 
OOC and replace it with a reference to management in Section 6.1. of 
the Exchange's Bylaws will alleviate confusion regarding the 
responsibilities of the Advisory Board. The Exchange notes that the 
Advisory Board's Charter provides that the Advisory Board shall advise 
the Board and ``management'' regarding matters of interest to TPHs.\23\ 
Replacing the term OOC with management will ensure that the Exchange's 
Bylaws conform to the Advisory Board Charter, thereby reducing 
uncertainty about the responsibilities of the Advisory Board.
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    \23\ See id.
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    Lastly, the proposed changes to Rules 4.14 and 6.20 will provide 
the Exchange with additional flexibility should the President be 
unavailable and thus unable to carry out the authorities delegated in 
those rules. The Commission believes that authorizing the President to 
designate an appropriately qualified alternate Exchange official to 
perform the responsibilities of the President will clarify the 
appropriate officials authorized to carry out certain duties should the 
President be unavailable. Such clarification should perfect the 
mechanism of a free and open market and protect investors and the 
public interest by eliminating potential uncertainty regarding the 
appropriate individual to carry out certain Exchange authorities in the 
absence of the President, which should enable the Exchange to continue 
operations with minimal disruption.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\24\ that the proposed rule change (SR-CBOE-2016-047) be, and it 
hereby is, approved.
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    \24\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\25\
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    \25\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-16853 Filed 7-15-16; 8:45 am]
 BILLING CODE 8011-01-P


