[Federal Register Volume 82, Number 47 (Monday, March 13, 2017)]
[Notices]
[Pages 13527-13529]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-04815]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80167; File No SR-CBOE-2017-017]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing of a Proposed Rule Change To Amend the 
Bylaws and Certificate of Incorporation

March 7, 2017.
    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 February 22, 2017, Chicago Board Options Exchange, Incorporated 
(the ``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.
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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 proposes to amend its Bylaws and Certificate of 
Incorporation. The text of the proposed rule change is available on the 
Exchange's Web site (http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), 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

[[Page 13528]]

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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend its Bylaws and Certificate of 
Incorporation. Specifically the Exchange proposes to amend its Board 
size range and eliminate its Compensation Committee.
    First, the Exchange proposes to amend its Bylaws relating to Board 
size range. Currently, Section 3.1 of the Bylaws provide that the Board 
shall consist of not less than 12 and not more than 16 directors. The 
Exchange proposes to change the Board size range such that the Board 
shall consist of no less than 5 directors. The Exchange believes the 
proposed change will provide greater flexibility by permitting the 
Board to increase or decrease the size of the board without the need to 
further amend the Bylaws.\3\ The Exchange notes that any changes in the 
number of directors will continue to be in all cases subject to the 
compositional requirements of the board set forth in the Bylaws, 
including its provision relating to the fair representation of 
members.\4\ The Exchange also notes that the Bylaws of other Exchanges 
have similar board size provisions.\5\ The Exchange also proposes to 
make conforming changes to its Certificate of Incorporation. 
Specifically, CBOE proposes to amend subparagraph (b) of Article Fifth 
to also provide that the Board of Directors shall consist of not less 
than 5 directors, and eliminate the current referenced range of 12 to 
16 directors.
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    \3\ The Board notes that it does not at this time anticipate 
changing the current Board size outside of the original range of 12-
16 directors.
    \4\ See Section 3.2 of the CBOE Bylaws.
    \5\ See e.g., Fourth Amended and Restated Bylaws of BZX 
Exchange, Inc., Article III, Board of Directors, Section 2(a), which 
provides that the Board of Directors shall consist of four (4) or 
more Directors, the number of which would be determined by 
resolution of the Board.
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    Next, the Exchange proposes to eliminate the Exchange-level 
Compensation Committee. The Exchange seeks to eliminate the 
Compensation Committee because it believes that the Compensation 
Committee's functions are duplicative of the functions of the 
Compensation Committee of its parent company, CBOE Holdings.\6\ 
Specifically, under its charter, the CBOE Holdings Compensation 
Committee has authority to assist the CBOE Holdings Board of Directors 
in carrying out its overall responsibilities relating to executive 
compensation and also, among other things, (i) recommending the 
compensation of the Company's Chief Executive Officer and certain other 
executive officers and (ii) approving and administering all cash and 
equity-based incentive compensation plans of the Company that affect 
employees of the Company and its subsidiaries. Similarly, under its 
charter, the CBOE Compensation Committee has authority to assist the 
CBOE Board and the Parent Compensation Committee in carrying out its 
overall responsibilities relating to executive compensation as well as 
(i) recommending the compensation of certain executive officers 
designated by the Board whose compensation has not been, and is not 
expected to be, determined by the compensation committee of the Parent 
Board or another Board committee \7\ and (ii) assist the Parent 
Compensation Committee in the administration of cash and equity-based 
incentive compensation plans of the Company that affects employees of 
the Company and its subsidiaries. As such, other than to the extent 
that the CBOE Compensation Committee recommends the compensation of 
executive officers whose compensation is not already determined by the 
CBOE Holdings Compensation Committee, its activities are duplicative of 
the activities of the CBOE Holdings Compensation Committee. The 
Exchange notes that currently, each of the executive officers whose 
compensation would be determined by the CBOE Compensation Committee is 
also an executive officer of CBOE Holdings, and as such, the CBOE 
Holdings Compensation Committee already performs these functions for 
such officers. To the extent that compensation need be determined by 
[sic] any CBOE officer who is not also a CBOE Holdings officer in the 
future, the CBOE Board or senior management will perform such action 
without the use of a compensation committee, as provided for in Section 
5.11 of the Bylaws. Thus, the responsibilities of the CBOE Compensation 
Committee are fully duplicated by the responsibilities of the CBOE 
Holdings Compensation Committee. Accordingly, CBOE is proposing to 
delete Section 4.3 of the CBOE Bylaws which provides for the CBOE 
Compensation Committee and to delete a reference to the CBOE 
Compensation Committee in Section 4.1(a) of the CBOE Bylaws (which 
lists the required CBOE Board committees). CBOE also proposes to 
eliminate the reference to the CBOE Compensation Committee in Section 
5.11 of the CBOE Bylaws (which provides that officers are entitled to 
salaries, compensation or reimbursement as shall be fixed or allowed 
from time to time by the Board unless otherwise delegated to the 
Compensation Committee of the Board or to members of senior 
management). CBOE believes that its proposal to eliminate its 
Compensation Committee is substantially similar to prior actions taken 
by other securities exchanges with parent company compensation 
committees to eliminate their exchange-level compensation 
committees.\8\
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    \6\ The Exchange notes that the current composition of the CBOE 
and CBOE Holdings Compensation Committees are the same.
    \7\ The Exchange notes that pursuant to its Charter, the CBOE 
Regulatory Oversight and Compliance Committee (ROCC) of the CBOE 
Board recommends to the Board compensation for the Chief Regulatory 
Officer and any Deputy Chief Regulatory Officers. The Exchange notes 
that the proposed change will not affect this process. The Exchange 
also notes that currently not all executive officers of CBOE are 
required to have their compensation determined by the Compensation 
Committee.
    \8\ See e.g., Securities Exchange Act Release No. 60276 (July 9, 
2009), 74 FR 34840 (July 17, 2009) (SR-NASDAQ-2009-042). See also 
Securities Exchange Act Release No. 62304 (June 16, 2010), 75 FR 
36136 (June 24, 2010) (SR-NYSEArca-2010-31).
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Securities Exchange Act of 1934 (the ``Act'') and the rules and 
regulations thereunder applicable to the Exchange and, in particular, 
the requirements of Section 6(b) of the Act.\9\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \10\ requirements that the rules of an exchange be 
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. Additionally, 
the Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \11\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
    \11\ Id.

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[[Page 13529]]

    In particular, the proposed rule change to amend the Board size 
range in the Bylaws and Certificate of Incorporation provides the Board 
with flexibility. Additionally, the Exchange is not proposing to amend 
any of the compositional requirements currently set forth in the 
Bylaws. The Exchange therefore believes that the proposed changes will 
provide greater flexibility to the Exchange in populating a Board of 
Directors that includes directors with relevant and diverse expertise, 
while continuing to ensure that the Board is of adequate size and the 
existing compositional requirements of the Exchange are met, including 
the provision relating to the fair representation of members.
    The Exchange believes eliminating the Exchange-level Compensation 
Committee allows the Exchange to eliminate a board committee whose 
responsibilities overlap with, and are adequately handled by, the 
corresponding committee of the Exchange's ultimate parent. This will 
allow directors of the Exchange to focus their attention on matters 
falling directly within the purview of the Exchange's board, including 
its orderly discharge of regulatory duties 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.

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 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 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-2017-017 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-CBOE-2017-017. 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 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 Number SR-CBOE-2017-017 and should be 
submitted on or before April 3, 2017. 
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    \12\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-04815 Filed 3-10-17; 8:45 am]
 BILLING CODE 8011-01-P