82 FR 60649 - Self-Regulatory Organizations; Cboe BYX Exchange, Inc.; Cboe BZX Exchange, Inc.; Cboe EDGA Exchange, Inc.; Cboe EDGX Exchange, Inc.; Order Granting Accelerated Approval of a Proposed Rule Change Relating to Its Director Nomination and Committee Appointment Process and Its Nominating and Governance Committee

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 244 (December 21, 2017)

[Federal Register Volume 82, Number 244 (Thursday, December 21, 2017)]
[Notices]
[Pages 60649-60651]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-27466]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82337; File No. SR-CboeBYX-2017-001; SR-CboeBZX-2017-
001; SR-CboeEDGA-2017-001; SR-CboeEDGX-2017-001]


Self-Regulatory Organizations; Cboe BYX Exchange, Inc.; Cboe BZX 
Exchange, Inc.; Cboe EDGA Exchange, Inc.; Cboe EDGX Exchange, Inc.; 
Order Granting Accelerated Approval of a Proposed Rule Change Relating 
to Its Director Nomination and Committee Appointment Process and Its 
Nominating and Governance Committee

December 15, 2017.

I. Introduction

    On November 14, 2017, each of Cboe BYX Exchange, Inc. (``Cboe 
BYX''), Cboe BZX Exchange, Inc. (``Cboe BZX''), Cboe EDGA Exchange, 
Inc. (``Cboe EDGA''), Cboe EDGX Exchange, Inc. (``Cboe EDGX'') (each an 
``Exchange'' and collectively, ``Exchanges'') 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 eliminate its Nominating and 
Governance Committee (``N&G Committee'') and amend the process by which 
(i) directors are elected, (ii) committee appointments are made, and 
(iii) vacancies are filled.\3\ The proposed rule changes were published 
for comment in the Federal Register on November 27, 2017.\4\ The 
Commission received no comments on the proposals. This order approves 
the proposed rule changes on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ In addition, the Exchanges propose to make several 
formatting changes throughout the Bylaws as well as to change their 
names in the title and signature lines in their Certificates of 
Incorporation (``Certificates'') to reflect recent changes to their 
legal names.
    \4\ See Securities Exchange Act Release Nos. 82122 (November 20, 
2017), 82 FR 53076 (November 27, 2017) (SR-CboeBYX-2017-001) 
(``CboeBYX Notice''); 82123 (November 20, 2017), 82 FR 56065 
(November 27, 2017) (SR-CboeBZX-2017-001) (``CboeBZX Notice''); 
82125 (November 20, 2017), 82 FR 56079 (November 27, 2017) (SR-
CboeEDGA-2017-001) (``CboeEDGA Notice''); 82126 (November 20, 2017), 
82 FR 56072 (SR-CboeEDGX-2017-001) (``CboeEDGX Notice'') 
(collectively, the ``Notices'').
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II. Description of the Proposal

    First, the Exchanges propose to eliminate their N&G Committees and 
provide that the sole stockholder of the Exchanges (Cboe Global 
Markets, Inc.) shall nominate and elect directors at the annual 
meetings of the sole stockholder,

[[Page 60650]]

except with respect to fair-representation directors (``Representative 
Directors'').\5\ As a consequence of the elimination of the N&G 
Committee, the Exchanges propose conforming changes to reallocate its 
responsibility. Specifically, the Exchanges propose to amend the 
definition of ``Representative Director Nominating Body'' to provide 
that if an Exchange's Board of Directors (``Board'') has two or more 
Industry Directors, excluding directors that are Exchange employees, 
those Industry Directors shall act as the Representative Director 
Nominating Body. If there are fewer than two Industry Directors on the 
Board (excluding directors that are employees of the Exchange), then 
the Exchange Member Subcommittee of the Advisory Board shall act as the 
Representative Director Nominating Body. The Exchanges further propose 
to amend their Bylaws and Certificates to provide that the sole 
stockholder is bound to nominate and elect the Representative Directors 
nominees recommended by the Representative Director Nominating Body or, 
in the event of a petition candidate, the Representative Director 
nominees who receive the most votes pursuant to a Run-off Election. 
Lastly, the Exchanges each propose to amend Section 3.1 of their Bylaws 
to provide that the Board is responsible for determining whether a 
director candidate satisfies the applicable qualifications for election 
as a director.
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    \5\ See id. at 56077; 56065; 56080; and 56072, respectively.
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    Second, the Exchanges propose to transfer the N&G Committee's 
current authority with respect to committee appointments to their 
Boards (or appropriate subcommittee of the Board).\6\ Specifically, the 
Exchanges propose to amend Section 4.2 and 6.1 of their Bylaws to state 
that members of the Executive Committee and Advisory Board will now be 
appointed by the Board. The Exchanges also propose to amend Section 4.4 
of their Bylaws to state that members of the Regulatory Oversight 
Committee (``ROC'') will be appointed by the Board on the 
recommendation of the Non-Industry Directors of the Board.
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    \6\ See id. at 56077; 56066; 56080; and 56073, respectively.
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    Third, the Exchanges propose to amend their Bylaws to alter the 
process for filling director vacancies.\7\ Specifically, the Exchanges 
propose to amend Section 3.4 of their Bylaws to provide that in the 
event any Industry or Non-Industry Director fails to maintain the 
required qualifications and the director's term is accordingly 
terminated, the sole stockholder, instead of the Board, shall be able 
to fill the vacancy.\8\ The Exchanges also propose to amend Section 3.5 
of their Bylaws to provide the sole stockholder with authority to fill 
vacancies so long as the elected Director qualifies for the position. 
Additionally, with respect to vacancies among the Representative 
Directors, the Representative Director Nominating Body will recommend 
an individual, or provide a list of recommended individuals, to the 
sole stockholder who shall select and fill the position.
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    \7\ See id. at 56077; 56066; 56080-81 and 56073, respectively.
    \8\ Amended Section 3.4 would also provide that if such 
terminated director requalified, the sole stockholder would have 
discretion to reappoint such director, including by increasing the 
size of the Board, should that be necessary.
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    Finally, the Exchanges propose to change their names in the title 
and signature lines in their Certificates to reflect recent changes to 
their legal names.\9\
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    \9\ Other technical formatting changes occur throughout the 
Bylaws as a result of the Exchanges proposed changes. See Notices, 
supra note 4 at 56077; 56066; 56081 and 56073, respectively.
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III. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule 
changes are consistent with the requirements of Section 6 of the Act 
\10\ and the rules and regulations thereunder applicable to a national 
securities exchange.\11\ In particular, the Commission finds that the 
proposed rule changes are consistent with Sections 6(b)(1) the Act,\12\ 
which require a national securities exchange to 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 and persons 
associated with its members with the provisions of the Act, the rules 
and regulations thereunder, and the rules of the Exchange. The 
Commission also finds that the proposed rule changes are consistent 
with Section 6(b)(3) of the Act,\13\ which requires that the rules of a 
national securities exchange assure the fair representation of its 
members in the selection of its directors and administration of its 
affairs, and provide that one or more directors shall be representative 
of issuers and investors and not be associated with a member of the 
exchange, broker, or dealer.
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    \10\ 15 U.S.C. 78f(b).
    \11\ In approving these proposed rule changes, the Commission 
has considered the proposed rules' impact on efficiency, 
competition, and capital formation. See 15 U.S.C. 78c(f).
    \12\ 15 U.S.C. 78f(b)(1).
    \13\ 15 U.S.C. 78f(b)(3).
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    The Commission believes that the Exchanges' proposals to eliminate 
their N&G Committees and reassign the N&G Committees' responsibilities 
are consistent with the Act. In particular, with respect to vesting the 
authority to nominate and elect directors in the sole stockholder, the 
Exchanges cite to the rules of another Exchange that similarly does not 
maintain an exchange-level nominating committee and instead provides 
that the sole stockholder of the Exchange nominates and elects their 
non-fair representation directors.\14\ Importantly, the Commission 
notes that the proposed rule changes do not substantively impact the 
provisions concerning the nomination and selection of fair 
representation directors that currently apply to the Exchanges. The 
sole stockholder will continue to be bound to nominate and elect the 
Representative Director nominees recommended by the Representative 
Director Nominating Body and there are no other changes to the process 
for the nomination and selection of Representative Directors. 
Accordingly, the Commission believes that members of the Exchanges 
should continue to have a voice in the governance of the Exchanges 
through Board representation and thus will have a voice in the 
Exchanges' exercise of their self-regulatory authority. The Exchanges 
represent that they are not proposing to amend any of the compositional 
requirements currently set forth in the Bylaws and that such existing 
compositional requirements must continue to be satisfied, including the 
provision relating to the fair representation of members.\15\
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    \14\ See Section 3.02(f) of the Amended and Restated NYSE Arca, 
Inc. Bylaws. See also Notices, supra note 4 at 56078; 56066-67; 
56081; and 56074, respectively.
    \15\ See Notices, supra note 4 at 56078; 56067; 56081 and 56074, 
respectively.
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    In addition, with respect to providing the Board, as opposed to the 
N&G Committee, with the authority to recommend and approve members of 
the Executive Committee, Advisory Board, and ROC, the Commission notes 
that other exchanges provide that their Boards, without input from a 
nominating committee, may appoint members to committees.\16\ While the 
internal Exchange delegations of the authority relating to the (i) 
nomination and election of directors, (ii) nominating body for 
Representative Directors, (iii)

[[Page 60651]]

filling of director vacancies and (iv) appointment of committees are 
being amended, the Exchanges represent that the substantive 
requirements of the Exchanges applicable to those items will remain the 
same.\17\
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    \16\ See e.g., Eleventh Amended and Restated Operating Agreement 
of New York Stock Exchange, LLC, Section 2.03(h) and By-Laws of 
Nasdaq Phlx LLC, Section 5-3.
    \17\ See Notices, supra note 4 at 56078; 56067; 56081 and 56074, 
respectively.
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    Finally, the Commission believes that the proposals to update the 
exchanges' names in their Certificates are consistent with the Act as 
they may also serve to reduce potential confusion by ensuring the 
Exchanges' corporate documents reflect their recent name changes.

IV. Accelerated Approval of the Proposal

    The Commission finds good cause, pursuant to Section 19(b)(2) of 
the Act,\18\ for approving the proposed rule changes, prior to the 30th 
day after publication of the Notices in the Federal Register.\19\ The 
Commission believes that the proposed rule changes do not raise novel 
regulatory issues and are substantively similar to the existing rules 
of other national securities exchanges.\20\ In particular, the 
Commission notes that the proposed rule changes do not substantively 
impact the provisions concerning the nomination and selection of fair 
representation directors that currently apply to the Exchanges. Members 
of the Exchanges should continue to have an opportunity to participate 
in the selection of Board representation and have input into the 
Exchanges' exercise of self-regulatory authority. In addition, the 
Commission did not receive any comment on the proposed changes. 
Accordingly, the Commission finds that good cause exists to approve the 
proposed rule changes on an accelerated basis.
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    \18\ 15 U.S.C. 78s(b)(2).
    \19\ As noted above, the Notices were published for comment in 
the Federal Register on November 27, 2017 and the comment period 
closed on December 12, 2017. Accordingly, the 30th day after 
publication of the Notices is December 27, 2017.
    \20\ See notes 15 and 17, supra.
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V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the Act 
\21\ that the proposed rule changes (SR-CboeBYX-2017-001; SR-CboeBZX-
2017-001; SR-CboeEDGA-2017-001; SR-CboeEDGX-2017-001), be, and hereby 
are, approved on an accelerated basis.
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    \21\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
Robert W. Errett,
Deputy Secretary.
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    \22\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2017-27466 Filed 12-20-17; 8:45 am]
 BILLING CODE 8011-01-P