
[Federal Register Volume 82, Number 82 (Monday, May 1, 2017)]
[Notices]
[Pages 20399-20401]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-08700]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80523; File No. SR-CBOE-2017-017]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Order Approving a Proposed Rule Change To Amend the 
Bylaws and Certificate of Incorporation

April 25, 2017.

I. Introduction

    On February 22, 2017, 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 \3\ and 
Certificate of

[[Page 20400]]

Incorporation.\4\ The Commission published the proposed rule change for 
comment in the Federal Register on March 13, 2017.\5\ The Commission 
received no comments on the proposal. 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 Amended and Restated Bylaws of Chicago Board Options 
Exchange, Incorporated (``Bylaws'').
    \4\ See Certificate of Incorporation of Chicago Board Options 
Exchange, Incorporated (``Certificate of Incorporation'').
    \5\ See Securities Exchange Act Release No. 80167 (March 7, 
2017), 82 FR 13527 (``Notice'').
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II. Description of the Proposed Rule Change

    First, the Exchange proposes to amend its Bylaws relating to the 
Board of Directors (``Board'') size range. Currently, Section 3.1 of 
the Bylaws provides that the Board shall consist of not less than 12 
and not more than 16 directors. The Exchange proposes to change the 
Board size range such that the Board shall consist of no less than five 
directors. The Exchange also proposes to make conforming changes to its 
Certificate of Incorporation by amending subparagraph (b) of Article 
Fifth to also provide that the Board shall consist of not less than 
five directors and to eliminate the current referenced range of 12 to 
16 directors.\6\
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    \6\ Id. at 13528.
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    Second, the Exchange proposes to eliminate the Exchange-level 
Compensation Committee. CBOE is proposing to delete Section 4.3 of the 
Bylaws, which provides for the CBOE Compensation Committee, and to 
delete a reference to the CBOE Compensation Committee in Section 4.1(a) 
of the Bylaws (which lists the required Board committees). CBOE also 
proposes to eliminate the reference to the CBOE Compensation Committee 
in Section 5.11 of the Bylaws, which provides that officers are 
entitled to salaries, compensation or reimbursement as shall be fixed 
or allowed from time to time by the Board unless otherwise delegated to 
the Board's Compensation Committee or to senior management. The 
Exchange justifies eliminating the CBOE Compensation Committee because 
its functions largely are duplicative of those of the Compensation 
Committee of its parent company, CBOE Holdings.\7\
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    \7\ Id. The Exchange notes that the composition of both 
committees currently are the same. See id. at 13528 n.6.
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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 Section 6 of the Act,\8\ 
and the rules and regulations thereunder applicable to a national 
securities exchange.\9\ In particular, the Commission finds that the 
proposed rule change is consistent with Section 6(b)(1) of the Act,\10\ 
which requires a national securities exchange to be so organized and 
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 the provisions of the Act. The Commission also finds 
that the proposed rule change is consistent with Section 6(b)(3) of the 
Act,\11\ which requires that the rules of a national securities 
exchange assure a fair representation of its members in the selection 
of its directors and administration of its affairs and provide that one 
or more directors shall be representative of issuers and investors and 
not be associated with a member of the exchange, broker, or dealer. The 
Commission further finds that the proposed rule change is consistent 
with Section 6(b)(5) of the Act,\12\ which requires, among other 
things, that a national securities exchange have rules 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.
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    \8\ 15 U.S.C. 78f.
    \9\ 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).
    \10\ 15 U.S.C. 78f(b)(1).
    \11\ 15 U.S.C. 78f(b)(3).
    \12\ 15 U.S.C. 78f(b)(5).
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    In particular, the Commission notes that the proposal to require at 
least five directors for the Board, rather than a required range of not 
less than 12 and not more than 16, is comparable to the board size 
requirements stipulated in the bylaws of at least one other exchange, 
which was approved by the Commission.\13\ Importantly, the Exchange 
represents that it is not proposing to amend any of the compositional 
requirements of the Board, including its provision relating to the fair 
representation of members, which are set forth in Section 3.2 of the 
Bylaws.\14\ The Commission notes that the Exchange represents that, 
while the proposal provides the Board with greater flexibility to 
determine the size of the Board without amending the Bylaws, it will 
continue to allow the Exchange to ensure that the Board is of adequate 
size and includes directors with relevant and diverse experience.\15\ 
The Exchange also notes that it has no current plans to change the size 
of its Board outside of the original range of 12-16 directors.\16\
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    \13\ See Securities Exchange Act Release No. 69884 (June 27, 
2013), 78 FR 40255 (July 3, 2013) (SR-BYX-2013-013) (providing that 
the BATS Y-Exchange board of directors will consist of four or more 
directors).
    \14\ See Notice, supra note 5, at 13528-29.
    \15\ See id. at 13529.
    \16\ See id. at 13528 n.3.
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    With regard to the proposal to eliminate the CBOE Compensation 
Committee, the Commission notes that this change is comparable to the 
governing structures of other exchanges, which the Commission has 
previously approved.\17\ As more fully set forth in the Notice, the 
Exchange explains that the CBOE Compensation Committee's 
responsibilities largely are duplicative of those of the corresponding 
Compensation Committee of CBOE Holdings, other than to the extent that 
the CBOE Compensation Committee recommends the compensation of 
executive officers whose compensation is not already determined by the 
CBOE Holdings Compensation Committee.\18\ Accordingly, under the 
proposed rule change, such functions now will be performed by the CBOE 
Holdings Compensation Committee or as otherwise provided in the 
Bylaws.\19\ The Commission notes that the Exchange represents that 
currently, each of the executive officers whose compensation would need 
to be determined by the Compensation Committee are officers of both 
CBOE and CBOE Holdings, but should compensation need to be determined 
in the future for any CBOE officer who is not also a CBOE Holdings 
officer, the CBOE Board or CBOE senior management will perform such 
action without the use of a compensation committee, as provided for in 
Section 5.11 of the Bylaws.\20\ Further, the Commission notes that the 
CBOE Regulatory Oversight and Compliance Committee (``ROCC'') of the 
Board will continue to recommend to the Board the compensation for the 
Chief Regulatory Officer and any Deputy Chief Regulatory

[[Page 20401]]

Officers, and this process is not be affected by this proposed rule 
change.
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    \17\ See e.g., Securities Exchange Act Release No. 60276 (July 
9, 2009), 74 FR 34840 (July 17, 2009) (SR-NASDAQ-2009-042); see also 
Securities Exchange Act Release No. 62304 (June 16, 2010), 75 FR 
36136 (June 24, 2010) (SR-NYSEArca-2010-31).
    \18\ See Notice, supra note 5, at 13528.
    \19\ Id.
    \20\ See Bylaws Section 5.11 (providing that ``[o]fficers of the 
Corporation shall be entitled to such salaries, compensation or 
reimbursement as shall be fixed or allowed from time to time by the 
Board unless otherwise delegated to the Compensation Committee of 
the Board or to members of senior management'').
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    For the reasons noted above, the Commission finds that the proposed 
rule change is consistent with the Act.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\21\ that the proposed rule change (SR-CBOE-2017-017) be, and 
hereby is, approved.
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    \21\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-08700 Filed 4-28-17; 8:45 am]
 BILLING CODE 8011-01-P


