
[Federal Register Volume 82, Number 82 (Monday, May 1, 2017)]
[Notices]
[Pages 20409-20410]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-08699]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80522; File No. SR-C2-2017-009]


Self-Regulatory Organizations; C2 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, C2 Options Exchange, Incorporated 
(``Exchange'' or ``C2'') 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 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 C2 Options Exchange, 
Incorporated (``Bylaws'').
    \4\ See Amended and Restated Certificate of Incorporation of C2 
Options Exchange, Incorporated (``Certificate of Incorporation'').
    \5\ See Securities Exchange Act Release No. 80166 (March 7, 
2017), 82 FR 13518 (``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.
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    Second, the Exchange proposes to eliminate the Exchange-level 
Compensation Committee. C2 is proposing to delete Section 4.3 of the 
Bylaws, which provides for the C2 Compensation Committee, and to delete 
a reference to the C2 Compensation Committee in Section 4.1(a) of the 
Bylaws (which lists the required Board committees). C2 also proposes to 
eliminate the reference to the C2 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 C2 Compensation Committee because its 
functions largely are duplicative of

[[Page 20410]]

those of the Compensation Committee of its parent company, CBOE 
Holdings.\7\
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    \7\ Id. at 13518-19. The Exchange notes that the composition of 
both committees currently are the same. See id. at 13518 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 13518.
    \15\ See id. at 13519.
    \16\ See id. at 13518 n.3.
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    With regard to the proposal to eliminate the C2 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 C2 Compensation Committee's responsibilities 
largely are duplicative of those of the corresponding Compensation 
Committee of CBOE Holdings, other than to the extent that the C2 
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 C2 and CBOE 
Holdings, but should compensation need to be determined in the future 
for any C2 officer who is not also a CBOE Holdings officer, the C2 
Board or C2 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 C2 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 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 13518-9.
    \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-C2-2017-009) 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. 2017-08699 Filed 4-28-17; 8:45 am]
 BILLING CODE 8011-01-P


