[Federal Register Volume 77, Number 244 (Wednesday, December 19, 2012)]
[Notices]
[Pages 75230-75231]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-30501]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68428; File No. SR-CBOE-2012-116]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Proposed Rule Change Related to Bylaw and Other 
Changes

December 13, 2012.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on November 30, 2012, the Chicago Board Options Exchange, 
Incorporated (``Exchange'' or ``CBOE'') filed with the Securities and 
Exchange Commission (the ``Commission'') the proposed rule change as 
described in Items I and II below, which Items have been prepared by 
the Exchange. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    CBOE proposes to: (i) Amend its Bylaws to expressly provide that 
the Representative Director Nominating Body and any petition candidate 
must satisfy the compositional requirements determined by the Board 
from time to time pursuant to a resolution adopted by the Board; (ii) 
amend its Bylaws relating to the Board size range such that the Board 
shall consist of not less than 12 and not more than 16 directors; and 
(iii) make conforming changes to the CBOE Certificate of Incorporation. 
The text of the proposed amendments to CBOE's Bylaws and CBOE's 
Certificate of Incorporation are available on the Exchange's Web site 
(http://www.cboe.org/legal), at the Exchange'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, the Exchange 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 those 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 parts 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 (i) Amend CBOE's 
Bylaws to expressly state that the Representative Director Nominating 
Body and any petition candidate must satisfy the compositional 
requirements determined by the Board from time to time pursuant to a 
resolution adopted by the Board; (ii) amend its Bylaws relating to the 
Board size range such that the Board shall consist of not less than 12 
and not more than 16 directors; and (iii) make conforming changes to 
the CBOE Certificate of Incorporation.
(1) Compositional Requirements Determined by the Board
    Last year, CBOE amended its Bylaws and Certificate of Incorporation 
to, among other things: (i) Eliminate the requirement that its Board of 
Directors be composed of at least 30% Industry Directors, and (ii) 
eliminate the requirement in Section 3.2 of the Bylaws that the 
Representative Directors must be Industry Directors.\3\ In its rule 
filing, CBOE noted that the changes would provide it with appropriate 
flexibility as it evaluates the structure and composition of its Board 
in the future.\4\ Additionally, CBOE stated that no matter what the 
composition of its Board is, the Exchange intends to maintain the fair 
representation of its Trading Permit Holders in the selection of its 
directors and administration of its affairs consistent with Section 
6(b)(3) of the Securities Exchange Act of 1934, as amended (``Act''). 
In approving CBOE's rule filing, the SEC noted that it has previously 
approved proposals in which an exchange's board of directors was 
composed of all or nearly all non-industry directors where the process 
was nevertheless designed to comply with the ``fair representation'' 
requirement in the selection and election of directors.\5\
---------------------------------------------------------------------------

    \3\ The Exchange notes that at all times at least 20% of the 
directors serving on the Board shall be Representative Directors 
nominated by the Representative Director Nominating Body as provided 
in Section 3.2 of the Bylaws (or otherwise selected through the 
petition process). Under Section 3.2, the Representative Director 
Nominating Body provides a mechanism for Trading Permit Holders to 
provide input with respect to the nominees for Representative 
Directors and Trading Permit Holders are also allowed to nominate 
alternative candidates by petition.
    \4\ See Securities Exchange Act Release No. 65682 (November 3, 
2011), 76 FR 69780 (November 9, 2011) (noticing for comment SR-CBOE-
2011-099); Securities Exchange Act Release No. 65980 (December 15, 
2011), 76 FR 79252 (December 21, 2011) (approving SR-CBOE-2011-099).
    \5\ See, e.g., Securities Exchange Act Release No. 48946 
(December 17, 2003), 68 FR 74678 (December 24, 2003) (approving SR-
NYSE-2003-34).
---------------------------------------------------------------------------

    In connection with these changes, CBOE also amended Section 3.1 of 
the Bylaws to provide that: ``[T]he Board shall determine from time to 
time pursuant to resolution adopted by the Board the total number of 
directors, the number of Non-Industry Directors and Industry Directors 
(if any), and the number of Representative Directors that are Non-
Industry Directors and Industry Directors (if any).'' CBOE now proposes 
to amend the Bylaws to expressly provide that any person nominated by 
the Representative Director Nominating Body and any petition candidate 
nominated pursuant to the Section 3.2 of the Bylaws shall satisfy the 
compositional requirements determined by the Board pursuant to a 
resolution adopted by the Board in accordance with Section 3.1 
designating the number of Representative Directors that are Non-
Industry Directors and Industry Directors (if any). CBOE also proposes 
to amend Section 3.5 of the Bylaws relating to the filling of vacancies 
on the Board to provide that the Representative Director Nominating 
Body shall only recommend individuals to fill a vacancy in a 
Representative Director position who satisfy the compositional 
requirements designated by the Board pursuant to resolution adopted by 
the Board in accordance with Section 3.1, designating the number of 
Representative Directors that are Non-Industry Directors and Industry 
Directors (if any). CBOE believes that these changes are consistent 
with the changes to the Bylaws that were made last year and simply 
makes those changes more explicit.

[[Page 75231]]

(2) Board Size Range
    CBOE proposes to amend its Bylaws relating to the Board size range. 
Currently, the Bylaws provide that the Board shall consist of not less 
than 11 and not more than 23 directors. CBOE proposes to change the 
Board size range such that the Board shall consist of not less than 12 
and not more than 16 directors. CBOE believes that this new Board size 
range is consistent with the current size of CBOE's Board and the Board 
size range that it expects to maintain in the future.
(3) Amendment to Certificate of Incorporation
    CBOE proposes to make conforming changes to its Certificate of 
Incorporation. Specifically, CBOE proposes to amend its Certificate of 
Incorporation to expressly provide that any individual(s) recommended 
by the Representative Director Nominating Body and any individual(s) 
who are petition candidates shall satisfy the compositional 
requirements determined by the Board of Directors from time to time 
pursuant to a resolution adopted by the Board in accordance with 
Section 3.1 of CBOE's Bylaws, designating the number of Representative 
Directors that are Non-Industry Directors and Industry Directors (if 
any). CBOE also proposes to include in its Certificate of Incorporation 
that the Board of Directors and/or Nominating and Governance Committee, 
as applicable, shall make such determinations as to whether a director 
candidate satisfies applicable qualifications for election as a 
director pursuant to and in accordance with Section 3.1 of the 
Corporation's Bylaws, which is consistent with the current provisions 
in the Bylaws.
2. Statutory Basis
    For the reasons set forth above, CBOE believes that this filing is 
consistent with Section 6(b) of the Act,\6\ in general, and furthers 
the objectives of Section 6(b)(1) of the Act \7\ and Section 6(b)(5) of 
the Act \8\ in particular, in that (i) it enables CBOE 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 CBOE 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. 
Specifically, CBOE believes that the proposed changes will enhance 
CBOE's governance structure by (i) by expressly providing that any 
person nominated by the Representative Director Nominating Body and any 
petition candidate nominated pursuant to the Section 3.2 of the Bylaws 
shall satisfy the compositional requirements determined by the Board 
pursuant to a resolution adopted by the Board in accordance with 
Section 3.1 designating the number of Representative Directors that are 
Non-Industry Directors and Industry Directors (if any); and (ii) by 
changing the Board size range from 11 to 23 directors to 12 to 16 
directors. Additionally, CBOE believes that this filing is consistent 
with Section 6(b)(3) of the Act in that CBOE's Bylaws will continue to 
provide for the fair representation of CBOE Trading Permit Holders in 
the selection of directors and the administration of the Exchange.
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(1).
    \8\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    CBOE does not believe that the proposed rule change will impose any 
burden on competition 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

    The Exchange neither solicited nor received comments on the 
proposal.

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 email to [email protected]. Please include 
File Number SR-CBOE-2012-116 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-CBOE-2012-116. This file 
number should be included on the subject line if email 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 on 
official business days between the hours of 10:00 a.m. and 3:00 p.m. 
Copies of such filing also will be available for inspection and copying 
at the principal offices 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 Number SR-CBOE-2012-116, and should be submitted 
on or before January 9, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
---------------------------------------------------------------------------

    \9\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-30501 Filed 12-18-12; 8:45 am]
BILLING CODE 8011-01-P