[Federal Register Volume 70, Number 156 (Monday, August 15, 2005)]
[Notices]
[Pages 47873-47874]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-4407]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52224; File No. SR-NSX-2005-03]


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

August 8, 2005.
    On May 13, 2005, the National Stock Exchange (the ``Exchange'' or 
``NSX'') 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 By-Laws to implement procedures for 
replacing a Director on its Board of Directors (``Board'') in the event 
that such Director fails to maintain the qualifications of his or her 
designated category. 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 proposed rule 
change, as amended, was published for comment in the Federal Register 
on June 30, 2005.\5\ The Commission received no comments on the 
proposal.
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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.
    \5\ See Securities Exchange Act Release No. 51912 (June 23, 
2005), 70 FR 37889.
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    The Exchange proposed to amend Article V, Section 3 of its By-Laws 
to provide that: (A) If a Director fails to maintain the necessary 
qualifications of his or her respective category, such Director would 
cease to be a Director upon a determination by the Board that the 
Director is no longer qualified, and his or her office would be deemed 
vacant for all purposes; (B) a Director who fails to maintain his or 
her necessary qualifications would have a grace period of the later of 
45 days or until the next regular Board meeting to re-qualify for his 
or her respective category; and (C) a Director (other than an 
Independent Director) whose membership has been suspended does not lose 
his or her qualification by reason of such suspension during the period 
of suspension, but rather, such Director may remain a Director during 
the suspension unless he or she is removed.\6\
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    \6\ 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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    Under the proposal, the Board is the sole judge of whether a 
Director is no longer qualified for his designated category and whether 
a Director has re-qualified. Effective upon the expiration of the grace 
period for re-qualification, the Board may fill any resulting vacancy 
with a person who qualifies for the category in which the vacancy 
exists.
    The Commission finds that the proposed rule change, as amended, is

[[Page 47874]]

consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities exchange\7\ 
and, in particular, the requirements of Section 6(b) of the Act\8\ and 
the rules and regulations thereunder. The Commission finds specifically 
that the proposed rule change, in particular, is consistent with 
Section 6(b)(1) of the Act,\9\ which requires that an exchange be so 
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, with 
the Act, and Section 6(b)(3) of the Act,\10\ which requires, among 
other things, that the rules of an exchange assure a fair 
representation of its members in the selection of it directors and 
administration of its affairs.
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    \7\ In approving this proposed rule change, the Commission notes 
that it has considered the proposed rule's impact on efficiency, 
competition, and capital formation. 15 U.S.C. 78c(f).
    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(1).
    \10\ 15 U.S.C. 78f(b)(3).
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    The Commission believes that the proposed rule change, as amended, 
should clarify NSX's By-Laws with respect to replacing Directors who no 
longer qualify for their positions on the Board and, thereby, should 
increase the efficiency of NSX's governance. The Commission notes that 
the proposal is based on Section 6.3(b) of the Chicago Board Options 
Exchange, Incorporated's Constitution, which was previously approved by 
the Commission.
    For the foregoing reasons, the Commission finds that the proposal 
does not raise any new issues of regulatory concern and is consistent 
with the requirements of Sections 6(b)(1)\11\ and 6(b)(3)\12\ of the 
Act.
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    \11\ 15 U.S.C. 78f(b)(1).
    \12\ 15 U.S.C. 78f(b)(3).
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\13\ that the proposed rule change (SR-NSX-2005-03) be, and hereby 
is, approved.
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    \13\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-4407 Filed 8-12-05; 8:45 am]
BILLING CODE 8010-01-P