[Federal Register Volume 76, Number 90 (Tuesday, May 10, 2011)]
[Notices]
[Pages 27112-27114]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-11357]



[[Page 27112]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64394; File No. SR-C2-2011-012]


Self-Regulatory Organizations; C2 Options Exchange, Incorporated; 
Notice of Filing of a Proposed Rule Change To Reduce the Minimum Size 
of the Nominating and Governance Committee

May 4, 2011.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'' or ``Exchange Act''),\1\ and Rule 19b-4 thereunder,\2\ 
notice is hereby given that on April 27, 2011, C2 Options Exchange, 
Incorporated (``C2'') filed with the Securities and Exchange Commission 
(``Commission'' or ``SEC'') the proposed rule change as described in 
Items I, II, and III below, which Items have been prepared by C2. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    C2 proposes to amend its Bylaws to change the minimum size of the 
C2 Nominating and Governance Committee.
    The text of the proposed amendments to C2's Bylaws and the proposed 
amendments to C2's rules is available on C2's Web site at (http://www.c2exchange.com/Legal), at C2's Office of the Secretary, and at the 
Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, C2 included statements 
concerning the purpose of, and basis for, the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. C2 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of this proposed rule change is to reduce the minimum 
size of C2's Nominating and Governance Committee from seven to five 
directors. Section 4.4 of the Second Amended and Restated Bylaws of C2 
(``Bylaws'') currently provides, in pertinent part, that the Nominating 
and Governance Committee shall consist of at least seven directors, 
including both Industry and Non-Industry Directors; that a majority of 
the directors on the Committee shall be Non-Industry Directors; and 
that the exact number of members on the Committee shall be determined 
from time to time by C2's Board of Directors. This rule change would be 
effectuated by amending Section 4.4 of the Bylaws to provide that the 
Nominating and Governance Committee shall consist of at least five 
directors. The other provisions of Section 4.4 of the Bylaws would 
remain unchanged. Additionally, the title of the Bylaws would be 
changed to the Third Amended and Restated Bylaws of C2.
    Section 3.1 of the Bylaws provides that the C2 Board of Directors 
shall consist of not less than eleven and not more than twenty-three 
directors, with the exact size determined by the Board. C2's Board size 
has declined recently from the Board's initial size of twenty-three 
directors in 2009 prior to the launch of trading on C2 to its current 
size of nineteen directors. In addition, the Board size will be 
declining further to sixteen directors at the time of the 2011 annual 
election of C2 directors (which is anticipated to occur in May 2011). 
As the Board size declines, it becomes more challenging to populate 
large Board committees since there are fewer directors to serve on the 
various C2 Board committees. The Exchange believes that reducing the 
minimum size of the Nominating and Governance Committee to five 
directors will help to alleviate this issue.
    Changing the minimum size of the Nominating and Governance 
Committee to five directors would also make the minimum size consistent 
with the minimum size of the Nominating and Governance Committee of 
CBOE Holdings, Inc. (``CBOE Holdings''), C2's parent company. C2 
believes that having the same composition requirements for the 
Nominating and Governance Committees of both C2 and CBOE Holdings will 
promote consistency and efficiency. C2 and CBOE Holdings currently have 
the same individuals serving on the C2 and CBOE Holdings Boards of 
Directors and on the C2 and CBOE Holdings Nominating and Governance 
Committees. This approach simplifies the process of scheduling and 
conducting meetings and allows the Boards and Nominating and Governance 
Committees of both entities to operate most efficiently. To the extent 
that C2 and CBOE Holdings desire to continue this approach in the 
future, this proposed rule change better enables C2 and CBOE Holdings 
to do so.
    The Exchange believes that its Nominating and Governance Committee 
will continue to be able to appropriately perform its functions if it 
were to be composed of five directors. The Exchange also believes that 
having a Nominating and Governance Committee with a minimum size of 
five directors is consistent with prior precedent, in that the Chicago 
Stock Exchange (``CHX'') has a Nominating and Governance Committee with 
a size of four directors.\3\ Additionally, it should be noted that 
although the proposed rule change would permit the Exchange [sic] 
appoint a five-person Nominating and Governance Committee and that the 
Exchange may do so in the future, it is the current intention of the 
Exchange to appoint a six-person Nominating and Governance Committee at 
the time of the 2011 annual election of C2 directors.
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    \3\ See Article II, Section 3 of the Bylaws of the Chicago Stock 
Exchange, Inc.
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    The Exchange will continue to provide for the fair representation 
of C2 Trading Permit Holders in the selection of directors and the 
administration of the Exchange consistent with Section 6(b)(3) of the 
Act \4\ following this rule change. In particular, the C2 Bylaws will 
continue to require that at least thirty percent of the directors on 
the C2 Board of Directors must be Industry Directors and that at least 
twenty percent of C2's directors must be Representative Directors. 
Also, the C2 Nominating and Governance Committee will continue to 
include both Industry and Non-Industry Directors and to have an 
Industry-Director Subcommittee that is composed of all of the Industry 
Directors serving on the Committee. Representative Directors will 
continue to be nominated (or otherwise selected through a petition 
process) by the Industry-Director Subcommittee. Additionally, C2 
Trading Permit Holders will continue to be able to nominate alternative 
Representative Director candidates to those nominated by the Industry 
Director Subcommittee, in which case a Run-off Election will be held in 
which C2's Trading Permit Holders vote to determine which candidates 
will be elected to the C2 Board of Directors to serve as Representative 
Directors.
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    \4\ 15 U.S.C. 78f(b)(3).
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2. Statutory Basis
    For the reasons set forth above, C2 believes that this filing is 
consistent

[[Page 27113]]

with Section 6(b) of the Act,\5\ in general, and furthers the 
objectives of Section 6(b)(1) of the Act \6\ and Section 6(b)(5) of the 
Act \7\ in particular, in that (i) It enables C2 to be so organized as 
to have the capacity to be able to carry out the purposes of the Act 
and to comply, and to enforce compliance by its Trading Permit Holders 
and persons associated with its Trading Permit Holders, with the 
provisions of the Act, the rules and regulations thereunder, and the 
rules of C2 and (ii) to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, to remove 
impediments to, and perfect the mechanism of, a free and open market 
and, in general, to protect investors and the public interest.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(1).
    \7\ 15 U.S.C. 78f(b)(5).
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    Specifically, the proposed changes will streamline, make more 
efficient, and improve C2's governance structure by conforming the 
minimum size requirements of the C2 Nominating and Governance Committee 
and the CBOE Holdings Nominating and Governance Committee, which the 
Exchange believes will promote consistency and efficiency and better 
enable C2 and CBOE Holdings to have the same Nominating and Governance 
Committee compositions if desired. To the extent that the proposed 
changes enable C2 and CBOE Holdings to have the same Nominating and 
Governance Committee compositions if desired, the process of scheduling 
and conducting Nominating and Governance Committee meetings is 
simplified, as there can be meetings held at the same time instead of 
multiple separate meetings at different times. This furthers C2's 
ability to be organized in a manner to have the capacity to be able to 
carry out the purposes of the Act consistent with Section 6(b)(1) of 
the Act \8\ and to carry out the purposes of Section 6(b)(5) of the 
Act.\9\
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    \8\ 15 U.S.C. 78f(b)(1).
    \9\ 15 U.S.C. 78f(b)(5).
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    The proposed rule change will not impact the current provisions of 
the C2 Bylaws that are designed to assure the fair representation of C2 
Trading Permit Holders in the selection of directors and the 
administration of C2, and thus is consistent with Section 6(b)(3) of 
the Act.\10\ In particular, the Bylaws will continue to require that at 
least thirty percent of C2's directors be Industry Directors; that at 
least twenty percent of C2's directors be Representative Directors; 
that the C2 Nominating and Governance Committee include both Industry 
and Non-Industry Directors and have an Industry-Director Subcommittee 
composed of all of the Industry Directors on the Committee; that 
Representative Directors be nominated (or otherwise selected through a 
petition process) by the Industry-Director Subcommittee; and that C2 
Trading Permit Holders are able to nominate alternative Representative 
Director candidates to those nominated by the Industry Director 
Subcommittee, in which case a Run-off Election is held in which C2's 
Trading Permit Holders vote to determine which candidates are elected 
as Representative Directors.
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    \10\ 15 U.S.C. 78f(b)(3).
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    The proposed rule change was prompted by the reduction in the size 
of the C2 Board of Directors since, as the Board size declines, it 
becomes more challenging to populate large Board committees. The 
Exchange believes that reducing the minimum size of the C2 Nominating 
and Governance Committee will help to alleviate this issue and that, 
notwithstanding this change, the Committee will continue to be able to 
appropriately perform its functions, operate effectively, and thus 
enable the Exchange to comply with Section 6(b)(1) of the Act.\11\
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    \11\ 15 U.S.C. 78f(b)(1).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    C2 does not believe that the proposed rule change will impose any 
burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.

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 with respect to the 
proposed rule change.

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

    Within 45 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 self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove such proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule 
change 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 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-C2-2011-012 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington DC 20549-1090.

All submissions should refer to File Number SR-C2-2011-012. 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 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 that are 
filed with the Commission, and all written communications relating to 
the proposed rule change 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 Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street, NE., 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of such filing also will be available for 
inspection and copying at the principal office of the Exchange. 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 No. SR-C2-2011-012 and should be 
submitted on or before May 31, 2011.


[[Page 27114]]


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-11357 Filed 5-9-11; 8:45 am]
BILLING CODE 8011-01-P