[Federal Register Volume 70, Number 125 (Thursday, June 30, 2005)]
[Notices]
[Pages 37889-37891]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-3432]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51912; File No. SR-NSX-2005-03]


Self-Regulatory Organizations; National Stock Exchange; Notice of 
Filing of Proposed Rule Change, and Amendments No. 1 and 2 Thereto, 
Relating to the Ongoing Qualification of the Members of NSX's Board of 
Directors

June 23, 2005.
    Pursuant to Section 19(b)(1) of 1934 (``Act'') \1\ and Rule 19b-4 
thereunder,\2\ notice is hereby given that on May 13, 2005, the 
National Stock ExchangeSM (the ``Exchange'' or ``NSX'' 
SM) filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by NSX. On June 10, 2005, 
the Exchange filed Amendment No. 1 to the proposed rule change.\3\ On 
June 21, 2005, the Exchange filed Amendment No. 2 to the proposed rule 
change.\4\ The Commission is publishing this notice to solicit comments 
on the proposed rule change, as amended, from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ In Amendment No. 1, the Exchange clarified certain language 
in Section 3(a) of the proposed rule change, made conforming changes 
to Exhibit 1 to the proposed rule change and corrected page 
numbering errors in the initial filing.
    \4\ In Amendment No. 2, the Exchange revised the proposed rule 
text, as well as, the proposed rule change's statutory basis 
section.
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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 Article V, Section 3 of its By-Laws 
which pertains to the ongoing qualification of the members of its Board 
of Directors (``Board''). Below is the amended text of the proposed 
rule change. Proposed new language is in italics.\5\
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    \5\ The reference to ``Independent Director'' in proposed 
Article V, Section 3(b)(2) of the NSX By-Laws is based upon the 
Commission's prior approval of Securities Exchange Act Release No. 
51765 (May 31, 2005), 70 FR 33238 (June 7, 2005) (SR-NSX-2005-02).
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* * * * *
CODE OF REGULATIONS (BY-LAWS) OF NATIONAL STOCK EXCHANGE
* * * * *
ARTICLE V
Exchange Organization and Administration
* * * * *
Section 3. Vacancies
    (a) Any intraterm vacancy that may occur on the Board caused by 
death, resignation or otherwise shall be filled by the Directors then 
in office by a person having the same qualifications, as set forth in 
Section 1of Article V of these By-Laws, as those of the Director whose 
seat is vacant. The person selected to fill such vacancy shall serve 
the remaining term of office.
    (b) In the event any Director fails to maintain the qualifications 
of his designated category, as set forth in Section 1 of Article V of 
these By-Laws, of which failure the Board shall be the sole judge, the 
Director shall, upon determination of the Board that the Director is no 
longer qualified, cease to be a Director, his office shall become 
vacant and (effective upon the expiration of the grace period for 
requalification set forth in Subsection (1) below), the vacancy may be 
filled by the Board with a person who qualifies for the category in 
which the vacancy exists.
    (1) A Director who fails to maintain the applicable qualifications 
will be allowed the later of (i) 45 days from the date when the Board 
determines the Director is no longer qualified or (ii)

[[Page 37890]]

until the next regular Board meeting following the date when the Board 
makes such determination, in which to requalify and thereafter continue 
to serve the remainder of such Director's term. During any such period 
up until the time when the Director requalifies, the Director shall be 
deemed not to hold office and the seat formerly held by the Director 
shall be deemed to be vacant for all purposes. The Board shall be the 
sole judge of whether the Director has requalified.
    (2) A Director (other than an Independent Director) whose 
membership has been suspended does not lose his qualification by reason 
of such suspension during the period of suspension.
* * * * *

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 proposal and discussed 
any comments it received on the proposed rule change, as amended. 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 amend its By-Laws pertaining to the 
ongoing qualification of the members of its Board. Under the proposal, 
Article V, Section 3 of the NSX By-Laws would be amended to provide 
that if a Director fails to maintain the necessary qualifications of 
his respective category,\6\ the Director will cease to be a Director 
upon determination by the Board that the Director is no longer 
qualified and his office shall become vacant. The proposal will also 
provide the later of 45 days or until the next regular Board meeting 
for a Director who is no longer qualified for a designated category to 
requalify. During any period in which a Director is not qualified for a 
designated category, the Director shall be deemed not to hold office 
and the position formerly held by the Director shall be deemed vacant 
for all purposes. Under the proposal, the Board will be the sole judge 
of whether a Director is no longer qualified for his designated 
category and whether a Director has requalified. Effective upon the 
expiration of the grace period for requalification, the Board may also 
fill any resulting vacancy with a person who qualifies for the category 
in which the vacancy exists. Finally, the proposal would provide that a 
Director (other than an Independent Director) whose membership has been 
suspended does not lose his qualification by reason of such suspension 
during the period of suspension. Rather, such Director may remain a 
Director during the suspension unless he is removed.\7\
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    \6\ The Board is currently composed of thirteen voting 
Directors. Those Directors are categorized as follows: ``(a) the 
Exchange President; (b) two Proprietary Members with certificates, 
or executive officers of Proprietary Member organizations with 
certificates, who are Designated Dealers in the National Securities 
Trading System (`Designated Dealer Directors'); (c) one Proprietary 
Member with certificate or an executive officer of a Proprietary 
Member organization with certificate, who conducts a nonmember 
public customer business on the Exchange (`At-Large Director'); (d) 
the Chairman of [the Chicago Board Options Exchange] (`CBOE 
Director'); (e) the President of CBOE (`CBOE Director'); (f) four 
CBOE members or executive officers of CBOE member organizations 
(`CBOE Directors'); and (g) three representatives of issuers and 
investors who shall not be associated with any member of the 
Exchange or with any registered broker or dealer or with another 
self-regulatory organization, other than as a public trustee or 
director (`Public Directors'). Excepting affiliations with national 
securities exchanges, no two or more Directors may be partners, 
officers of directors of the same person or be affiliated with the 
same person.'' See Article V, Section 1.1 of the NSX By-Laws. The 
Exchange is proposing to make various changes to the composition of 
the Board in a separate rule proposal, which is currently pending 
before the Commission. See Securities Exchange Act Release No. 51765 
(May 31, 2005), 70 FR 33238 (June 7, 2005) (SR-NSX-2005-02). Through 
that proposal, the composition of the Board is proposed to be 
revised to consist of the NSX Chief Executive Officer; three Member 
Directors; six Independent Directors; and three CBOE Directors.
    \7\ A Director may be removed with cause by a majority vote of 
those individuals or entities entitled to vote to elect such 
Director. See Article V, Section 4 of the NSX By-Laws.
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2. Statutory Basis
    The Exchange believes the proposed rule change, as amended, 
enhances the fair and efficient governance of the Exchange. Therefore, 
NSX believes the proposed rule change, as amended, furthers the 
objectives of Section 6(b) of the Act,\8\ in general, and Section 
6(b)(3),\9\ in particular, in that it assures a fair representation of 
its members in the selection of it directors and administration of its 
affairs. The proposed rule change also furthers the objectives of 
Section 6(b)(1),\10\ in that it helps to assure that the Exchange is so 
organized and has the capacity to be able to carry out the purposes of 
the Act and to comply, and to enforce compliance by its members, with 
the Act.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(3).
    \10\ 15 U.S.C. 78f(b)(1).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change, as 
amended, will impose any inappropriate burden on competition.

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

    No written comments were solicited or received in connection with 
the proposed rule change, as amended.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the Exchange consents, the Commission will:
    (a) By order approve such proposed rule change, as amended; or
    (b) Institute proceedings to determine whether the proposed rule 
change, as amended, should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change, as amended, 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 e-mail to [email protected]. Please include 
File Number SR-NSX-2005-03 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-9303.
    All submissions should refer to File Number SR-NSX-2005-03. This 
file number should be included on the subject line if e-mail is used. 
To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will

[[Page 37891]]

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, as amended, that are filed with the Commission, and all written 
communications relating to the proposed rule change, as amended, 
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 inspection and copying in the Commission's 
Public Reference Room. Copies of such filing also will be available for 
inspection and copying at the principal office of NSX. 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-NSX-2005-03 and should be 
submitted on or before July 21, 2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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J. Lynn Taylor,
Assistant Secretary.
[FR Doc. E5-3432 Filed 6-29-05; 8:45 am]
BILLING CODE 8010-01-P