[Federal Register Volume 81, Number 220 (Tuesday, November 15, 2016)]
[Notices]
[Pages 80157-80159]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-27373]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79268; File No. SR-CBOE-2016-076]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing of a Proposed Rule Change in Connection 
With a Proposed Corporate Transaction Involving CBOE Holdings, Inc. and 
Bats Global Markets, Inc.

November 8, 2016.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\, and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on November 4, 2016, Chicago Board Options Exchange, Incorporated 
(``Exchange'' or ``CBOE'') 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 the 
Exchange. 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

    The Exchange submits this rule filing in connection with a proposed 
corporate transaction (the ``Transaction'') involving its ultimate 
parent company, CBOE Holdings, Inc. (``CBOE Holdings''), two wholly 
owned subsidiaries of CBOE Holdings, CBOE Corporation and CBOE V, LLC 
(``CBOE V''), and Bats Global Markets, Inc. (``BGM''). BGM is the 
ultimate parent company of Bats BZX Exchange, Inc. (``Bats BZX''), Bats 
BYX Exchange, Inc. (``Bats BYX''), Bats EDGX Exchange, Inc. (``Bats 
EDGX''), and Bats EDGA Exchange, Inc. (``Bats EDGA'' and, together with 
Bats BZX, Bats BYX, and Bats EDGX, the ``Bats Exchanges''). Upon 
completion of the Transaction (the ``Closing''), CBOE Holdings will 
become the ultimate parent of the Bats Exchanges.
    On September 25, 2016, CBOE Holdings, CBOE Corporation, CBOE V, and 
BGM entered into an Agreement and Plan of Merger, as it may be amended 
from time to time (the ``Merger Agreement''). In connection with the 
Transaction, the Exchange seeks the Commission's approval of a 
provision in the Merger Agreement regarding the composition of the CBOE 
Holdings Board of Directors (``CBOE Holdings Board'') upon the Closing. 
There are no

[[Page 80158]]

proposed changes to Exchange rules or governing documents of CBOE 
Holdings or the Exchange.

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 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange submits this filing for Commission approval of a 
provision in the Merger Agreement regarding the composition of the CBOE 
Holdings Board upon Closing. Other than as described herein, the 
Exchange will continue to conduct its regulated activities (including 
operating and regulating its market and Trading Permit Holders) in 
essentially the same manner it conducts them today, and will not make 
any changes to its regulated activities in connection with the 
Transaction. The Exchange is not proposing any amendments to its 
trading and regulatory rules or organizational and governance documents 
at this time. If the Exchange determines to make any such changes, it 
will submit rule filings to the Commission proposing such changes to 
the extent required by the Act and the rules and regulations 
thereunder.
Current Corporate Structures
    Each of CBOE and C2 Options Exchange, Incorporated (``C2'' and, 
together with the Exchange, the ``CBOE Exchanges'') is a Delaware 
corporation that is a national securities exchange registered with the 
Commission pursuant to Section 6(a) of the Act.\3\ Each CBOE Exchange 
is a direct, wholly owned subsidiary of CBOE Holdings, a publicly 
traded Delaware corporation. CBOE V is a Delaware limited liability 
company and direct, wholly owned subsidiary of CBOE Holdings, which 
currently has no material assets and conducts no operations.
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    \3\ 15 U.S.C. 78f(a).
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    Each Bats Exchange is a Delaware corporation that is a national 
securities exchange registered with the Commission pursuant to Section 
6(a) of the Act.\4\ BGM is a publicly traded Delaware corporation and 
the ultimate parent of the Bats Exchanges.
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    \4\ 15 U.S.C. 78f(a).
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The Transaction
    Pursuant to and subject to the terms of the Merger Agreement, at 
the Closing, among other things, each share of BGM common stock 
(whether voting or non-voting) issued and outstanding (other than 
shares owned by CBOE Holdings, BGM or any of their respective 
subsidiaries, and certain shares held by BGM stockholders that are 
entitled to and properly demand appraisal rights) will be converted 
into the right to receive a particular number of shares of CBOE 
Holdings common stock, an amount of cash, or a combination of both, at 
the election of the holder of such share of BGM common stock. BGM will 
ultimately merge with and into CBOE Holdings' wholly owned subsidiary 
CBOE V, at which time the separate existence of BGM will cease and CBOE 
V will be the surviving company.
Post-Closing Corporate Structure
    As a result of the Transaction, CBOE Holdings will be the ultimate 
parent of the Bats Exchanges, each of which will continue to operate 
separately. CBOE Holdings will continue to be a publicly owned company 
and the ultimate parent of the CBOE Exchanges, each of which will 
continue to operate separately.
Post-Closing CBOE Holdings Board
    In connection with the Transaction, CBOE Holdings agreed in the 
Merger Agreement to take all requisite actions so, as of the Closing, 
the CBOE Holdings Board will include three individuals designated by 
BGM who (1) are serving as BGM directors immediately prior to the 
Closing and (2) comply with the policies (including clarifications of 
the policies provided to BGM) of the Nominating and Governance 
Committee of the CBOE Holdings Board as in effect on the date of the 
Merger Agreement and previously provided to BGM (each of whom will be 
appointed to the CBOE Holdings Board as of the Closing). The CBOE 
Holdings Board currently consists of 14 directors.\5\ The Exchange 
expects three current CBOE Holdings directors to resign effective prior 
to the Closing and the remaining CBOE Holdings directors to fill the 
vacancies created by those resignations with the three BGM directors 
designated by BGM.\6\
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    \5\ Pursuant to the Second Amended and Restated Certificate of 
Incorporation of CBOE Holdings (``CBOE Holdings Certificate'') and 
the Third Amended and Restated Bylaws of CBOE Holdings (``CBOE 
Holdings Bylaws''), the CBOE Holdings Board will consist of no less 
than 11 and no more than 23 directors, the exact number to be fixed 
by the CBOE Holdings Board from time to time pursuant to resolution 
adopted by the Board. See CBOE Holdings Certificate Article Seventh 
(b) and CBOE Holdings Bylaws Section 3.2.
    \6\ See Sections 3.4 and 3.5 of the CBOE Holdings Bylaws.
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act and the rules and regulations thereunder applicable to the 
Exchange and, in particular, the requirements of Section 6(b) of the 
Act.\7\ Specifically, the Exchange believes the proposed rule change is 
consistent with the Section 6(b)(5) \8\ because it would be consistent 
with and facilitate a governance and regulatory structure 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. The Exchange also believes 
the proposed rule change is consistent with Section 6(b)(1) of the 
Act,\9\ which provides the Exchange be organized and have the capacity 
to be able to carry out the purposes of the Act and to enforce 
compliance by the Exchange's Trading Permit Holders and persons 
associated with its Trading Permit Holders with the Act, the rules and 
regulations thereunder, and the rules of the Exchange.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
    \9\ 15 U.S.C. 78f(b)(1).
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    The proposed rule change is consistent with CBOE Holdings' 
organizational and governing documents previously filed with the 
Commission.\10\ The Exchange will continue to have the authority and 
ability to effectively fulfill its self-regulatory duties pursuant to 
the Act and the rules promulgated thereunder. CBOE Holdings' governing 
documents will not change at the Closing and,

[[Page 80159]]

therefore, will continue to include various provisions intended to 
protect and maintain the integrity of the self-regulatory functions of 
the Exchange. Additionally, the Commission will continue to have 
regulatory authority over the Exchange, as is currently the case, as 
well as jurisdiction over CBOE Holdings with respect to activities 
related to the Exchange.\11\
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    \10\ See, e.g., Securities Exchange Act Release Nos. 34-76282 
(October 27, 2015), 80 FR 67464 (November 2, 2015) (SR-CBOE-2015-
092); and 34-76281 (October 27, 2015), 80 FR 67461 (November 2, 
2015) (SR-C2-2015-022) (notices of filing and immediate 
effectiveness of recent proposed rule changes to amend the CBOE 
Holdings Certificate and Bylaws); see also supra notes 5 and 6.
    \11\ See, e.g., CBOE Holdings Certificate Article Fourteenth.
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    The Exchange is proposing no changes to its existing operational 
and trading structure in connection with the Transaction. Upon Closing, 
the Exchange will operate in essentially the same manner as it operates 
today. Therefore, the Exchange believes it will continue to satisfy the 
requirements of the Act and the rules and regulations thereunder 
applicable to a national securities exchange.

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

    The Exchange does not believe the proposed rule change will impose 
any burden on competition not necessary or appropriate in furtherance 
of the purposes of the Act. The proposed rule change relates to the 
corporate governance of CBOE Holdings--specifically a change in 
composition of the CBOE Holdings Board in connection with a corporate 
transaction--and not the operations of the Exchange. This is not a 
competitive filing and, therefore, imposes no burden on competition.

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 
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 up to 90 days (i) as the 
Commission may designate 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 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-2016-076 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-CBOE-2016-076. 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, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the 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 Number SR-CBOE-2016-076, and should be 
submitted on or before December 6, 2016.

    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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Brent J. Fields,
Secretary.
[FR Doc. 2016-27373 Filed 11-14-16; 8:45 am]
 BILLING CODE 8011-01-P