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 May 28, 2026, Texas Stock Exchange LLC (the “Exchange” or “TXSE”) filed with the Securities and Exchange Commission (“Commission”) a 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.

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

The Exchange filed a proposal to amend Rule 13.003 related to proxy voting, as further described below.

The text of the proposed rule change is provided in Exhibit 5.

The text of the proposed rule change is available on the Commission's website ( https://www.sec.gov/​rules/​sro.shtml) at the Exchange's website ( https://txse.com/​rule-filings), and at the principal office of the Exchange.

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

The Exchange proposes to amend Rule 13.003 to establish a mandatory process for the proportional allocation and voting of uninstructed shares held by Members of the Exchange on behalf of beneficial owners of TXSE-listed equity securities.^[3] Specifically, the proposed rule would require a Member to vote uninstructed shares at shareholder meetings and to allocate votes on each proposal in proportion to voting instructions received from beneficial owners for whom such Member holds shares in the applicable TXSE-listed security, subject to the exclusions and methodology set forth in the proposed rule.

The proposed rule reflects the principle that voting outcomes on matters up for a vote at TXSE-listed companies should be determined by the voting instructions of participating beneficial owners, with such instructions applied uniformly to the voting of uninstructed shares for every matter submitted to a shareholder vote. By replacing broker discretionary voting with a formula-driven allocation tied to instructions actually submitted, the proposed rule eliminates the exercise of broker discretion over shares in which the broker has no economic interest and also eliminates the inconsistent and proposal-dependent treatment of uninstructed shares produced by the framework currently in place in the market, while preserving all existing shareholder voting rights.

Overview

Existing TXSE Rule 13.003(b) established the baseline rule that a Member may not give a proxy to vote stock registered in its name unless the Member is the (i) beneficial owner of such stock; (ii) such proxy is given pursuant to the written instructions of the beneficial owner; or (iii) such proxy is given pursuant to the rules of any national securities exchange or association of which it is a member provided that the records of the Member clearly indicate the procedure it is follow. Existing TXSE Rule 13.003(c) separately prohibits discretionary voting on director elections (except for uncontested director elections of any investment company registered under the Investment Company Act of 1940), executive compensation, and other significant matters. Accordingly, for matters outside the prohibition of 13.003(c), the treatment of uninstructed shares under existing TXSE rules is generally informed by the rules of other national securities exchanges or associations the Member is permitted to follow, including NYSE Rule 452.

NYSE Rule 452 enumerates specific instances in which a NYSE member organization may not vote without customer instructions and lays out factors for determining whether a matter is one in which a NYSE member organization may vote without customer instructions. For matters not specifically enumerated, NYSE Regulation determines whether broker discretionary voting is permitted on a case-by-case basis. In practice, these categories are generally referred to as “routine” (where the member organization may vote without customer instructions) and “non-routine” (where the member organization may not vote without customer instructions).

The Commission has previously determined that voting outcomes should be determined by parties with an economic interest in the issuer and approved limits on broker discretionary voting. In 2009, the Commission approved amendments to NYSE Rule 452 that eliminated broker discretionary voting in the election of directors, whether contested or uncontested.^[4] The Commission reasoned that the election of directors is “not a `routine' issue for either the corporation or the shareholders” but rather “a key event in the operation and direction of the corporation and the shareholders' exercise of their rights and interests as the owners of the corporation,” and that voting on matters as critical as the election of directors should be “determined by those with an economic interest in the company . . . rather than the broker who has no such economic interest.” ^[5] The 2009 amendments were further extended in 2010, when the NYSE codified the prohibition on broker discretionary voting for matters relating to executive compensation in order to implement Section 957 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.^[6]

Notwithstanding these reforms, NYSE Rule 452's underlying routine/non-routine framework remains in place for matters outside the scope of the 2009 and 2010 amendments. Uninstructed shares, which commonly include a significant retail component, can be voted at the discretion of brokers on routine matters, treated as broker non-votes on non-routine matters, or not represented at the meeting at all in certain circumstances.^[7] The treatment of a given uninstructed share depends on which matters happen to appear on the ballot and how each is classified. This structure can affect quorum determinations, the ability to achieve approval thresholds, and a lower relative influence of beneficial owners who hold shares in a manner that are subject to NYSE Rule 452.

The Exchange proposes to replace this framework for TXSE-listed securities with a uniform process for the proportional allocation of uninstructed shares. Under the proposed rule, a Member would submit uninstructed shares and allocate votes on each proposal in proportion to the voting instructions received from beneficial owners for whom the Member holds shares in the applicable TXSE-listed security. The allocation operates the same way for every matter submitted to a vote, regardless of who proposes the matter.

This approach has two structural consequences that distinguish it from the existing framework. First, the proposed rule eliminates broker discretionary voting entirely. The Member does not vote uninstructed shares according to its own judgment, the recommendations of management, or any other external input (other than how participating beneficial owners have instructed the Covered Member); the Covered Member applies a prescribed formula based exclusively on instructions submitted by participating beneficial owners. In 2009, the Commission expressed its view that voting outcomes should be determined by parties with an economic interest in the issuer, not by brokers who have no such interest. The proposed rule applies that principle to every matter submitted to a shareholder vote at TXSE-listed companies. Second, the proposed rule eliminates the inconsistent and proposal-dependent treatment of uninstructed shares produced by NYSE Rule 452's routine/non-routine framework. Every matter on every ballot is treated the same way, ensuring that the treatment of uninstructed shares depends on the preferences of participating beneficial owners rather than the incidental composition of the meeting agenda.

As further described below, the proposed rule would not alter any beneficial owner's right to vote, abstain, withhold where applicable, or otherwise provide voting instructions. It is neutral as to voting choice: it does not favor management, opposition, or any shareholder proponent; it applies the same formula based solely on the voting instructions submitted by participating beneficial owners.

Existing TXSE Rule 13.003

TXSE Rule 13.003(b) currently prohibits a Member from giving a proxy to vote stock registered in its name, unless: (i) the Member is the beneficial owner of such stock; (ii) the proxy is given pursuant to the written instructions of the beneficial owner; or (iii) the proxy is given pursuant to the rules of any national securities exchange or association of which it is a member provided that the records of the Member clearly indicate the procedure it is following. As such, the treatment of uninstructed shares under the current framework generally turns on the discretionary voting rules applicable to the Member, including NYSE Rule 452.^[8]

Existing Rule 13.003(c) separately prohibits a Member that is not the beneficial owner of a security from granting a proxy to vote the security in connection with a shareholder vote on the election of a member of the board of directors (other than for a vote with respect to uncontested election of a member of the board of directors of any investment company registered under the Investment Company Act of 1940), executive compensation, or any other significant matter unless the beneficial owner of the security has instructed the Member to vote the proxy in accordance with the voting instructions of the beneficial owner. The proposed rule retains the restriction on discretionary voting in existing Rule 13.003(c), while requiring the ministerial proportional allocation outlined in the proposed rule.

Description of the Proposed Rule

Proposed Rule 13.003(c) would apply to a Member that holds shares of an equity security, with a primary listing on the Exchange, on behalf of a beneficial owner and has not received voting instructions from that beneficial owner as of the applicable instruction cutoff, referred to in the proposed rule as the “Calculation Date,” subject to the exclusions set forth in the proposed rule. A Member subject to proposed Rule 13.003(c) is referred to in the proposed rule as a “Covered Member.” The proposed rule would require the Covered Member to vote uninstructed shares at the shareholder meeting and to allocate votes on each proposal in the same proportion as the instructions received from participating beneficial owners for whom the Member holds shares in the applicable security.

Proposed Rule 13.003(c)(1) provides that the Covered Member shall submit a proxy designating the Uninstructed Shares as present at such meeting, regardless of whether any matter on the ballot for such meeting would otherwise qualify as a routine matter permitting discretionary voting under the rules of any other national securities exchange or association of which such Covered Member is a member. Submission of a proxy for purposes of representation at the meeting shall not be deemed the exercise of discretionary voting authority.

Proposed Rule 13.003(c)(2) provides that a Covered Member shall vote uninstructed shares on each proposal by casting votes FOR, AGAINST, and ABSTAINING, or such other voting categories as are available for the applicable proposal, in the same proportion as the aggregate voting instructions received by the Covered Member from beneficial owners of shares of such issuer held by the Covered Member who have submitted voting instructions with respect to such proposal. Proposed Rule 13.003(c)(2)(A) provides that if the Covered Member has received no voting instructions from any beneficial owner with respect to a particular proposal, the Covered Member shall vote all Uninstructed Shares as ABSTAINING, or in the applicable non-directional category available for such proposal, such as WITHHOLD.

Proposed Rule 13.003(c)(2)(B) provides that the proposed proportional allocation requirement would not apply to shares held or voted by a Covered Member in any capacity described in Rule 13.003(e), including shares voted by a Covered Member acting as an executor, administrator, guardian, trustee, or in a similar fiduciary capacity. The proposed requirement also would not apply to shares voted by a named ERISA Plan investment manager or by a designated investment adviser pursuant to Rule 13.003(e). Such shares also would be excluded from the calculation of the instructed vote distribution.

Existing Rule 13.003(c) would be re-lettered as Rule 13.003(d). The Exchange proposes to retain the existing prohibition on a Member that is not the beneficial owner of a Section 12 security granting a proxy to vote the security in connection with director elections, executive compensation, or any other significant matter determined by the Commission unless the beneficial owner has instructed the Member to vote the proxy in accordance with the beneficial owner's instructions. This prohibition would continue to apply to securities and accounts outside the scope of proposed Rule 13.003(c), including securities not listed on the Exchange and shares otherwise excluded from the proposed proportional allocation requirement. Proposed Rule 13.003(d) ( printed page 35595) would also clarify that the mandatory proportional allocation required under proposed Rule 13.003(c) does not constitute the giving of a proxy to vote at the Member's discretion in violation of paragraphs (b) or (d) of this TXSE Rule or Exchange Act Section 6(b)(10) because the Covered Member exercises no judgment, preference, or discretion in determining the votes cast for the Uninstructed Shares.

Proposed Rule 13.003(c)(3) provides that the proportional allocation required under paragraph (c)(2) of this TXSE Rule constitutes a mandatory ministerial obligation of the Covered Member. In executing such allocation, the Covered Member exercises no judgment, preference, or discretion as to how Uninstructed Shares are voted; the allocation is determined solely by application of the formula prescribed by such paragraph (c)(2) and Interpretation and Policy .02 to this TXSE Rule without modification or substitution by the Covered Member. The proportional allocation obligation under this paragraph (c) does not constitute the giving of a proxy to vote at the Member's discretion in violation of paragraphs (b) or (d) of this TXSE Rule or Exchange Act Section 6(b)(10).

Proposed Rule 13.003(c)(4) would require a Covered Member to maintain records of the proportional allocation methodology applied pursuant to proposed Rule 13.003(c)(2) in accordance with Exchange Act Rule 17a-4.

Proposed Interpretation and Policy .02 (a) would add the following definitions: (1) “Calculation Date” means the date and time by which the Covered Member customarily closes receipt of voting instructions from beneficial owners in connection with a shareholder meeting of the applicable issuer, in accordance with the Covered Member's standard proxy processing practices as applied to meetings of other issuers whose securities the Covered Member holds in the same capacity. The Calculation Date shall be no later than the date the Covered Member submits its final vote tally to the meeting tabulator. If a shareholder meeting is adjourned and reconvened, a new Calculation Date shall apply based on the reconvened meeting date in accordance with the same standard practices; (2) “Category Percentage” means, for each available voting category on a proposal, the quotient obtained by dividing the number of Total Instructed Shares allocated to such category by the Total Instructed Shares; (3) “Covered Member” has the meaning set forth in Rule 13.003(c) of this TXSE Rule; (4) “Instructed Vote Distribution” has the meaning set forth in Rule 13.003(c)(2) of this TXSE Rule; (5) “Total Instructed Shares” means, for a given proposal, the aggregate number of shares of the applicable issuer held in the Covered Member's custody for which voting instructions have been received and allocated to a voting category as of the Calculation Date, excluding shares described in Rule 13.003(c)(2)(B); and (6) “Uninstructed Shares” has the meaning set forth in Rule 13.003(c) of this TXSE Rule.

Proposed Interpretation and Policy .02 (b) would establish the methodology for calculating the proportional allocation of uninstructed shares. The calculation would be performed separately for each proposal on the ballot. A beneficial owner that provides voting instructions on one proposal but not another would be included in the instructed vote distribution only for the proposal on which instructions were received, and the shares would be treated as Uninstructed Shares for each proposal where voting instructions were not submitted. Any fractional allocation resulting from the allocation formula would be rounded down to the nearest whole share, and any remainder shares would be allocated to ABSTAINING.

Proposed Interpretation and Policy .02 (c) provides that the Instructed Vote Distribution and Total Instructed Shares shall be calculated separately for each proposal on the ballot. A beneficial owner who has submitted voting instructions with respect to one or more proposals but not all proposals shall be included in the Total Instructed Shares for each proposal on which instructions were received, and the shares held for such beneficial owner shall be treated as Uninstructed Shares for each proposal on which no instructions were received.

Proposed Interpretation and Policy .02 (d) provides that Where the voting options for a proposal include WITHHOLD AUTHORITY in lieu of, or in addition to, AGAINST, including in connection with director elections conducted under a plurality voting standard, the proportional allocation described in paragraph (b) of this Interpretation and Policy shall be applied to each available voting category in the same manner, substituting WITHHOLD AUTHORITY for AGAINST, where applicable. Any remainder shares shall be allocated to ABSTAINING, or to WITHHOLD AUTHORITY if ABSTAINING is not an available voting category for such proposal.

The Exchange is also proposing to make certain corresponding numbering changes to Rule 13.003 in order to accommodate the proposed changes.

Examples

The following examples illustrate the operation of proposed Rule 13.003(c) and proposed Interpretation and Policy .02.

Example 1: A Covered Member holds 100 shares of an Exchange-listed security on behalf of beneficial owners. As of the Calculation Date, the Covered Member has received voting instructions for 60 shares and has received no voting instructions for the remaining 40 shares. The allocation would be calculated as follows:

Example 2: A Covered Member holds 100 shares of an Exchange-listed security on behalf of beneficial owners. As of the Calculation Date, the Covered Member has received voting instructions for 3 shares and has received no voting instructions for the remaining 97 shares. The allocation would be calculated as follows: ( printed page 35596)

Background and History of Broker Discretionary Voting

The proposed rule should be understood against the historical development of broker discretionary voting and the modern street-name holding system. The Commission has described NYSE's broker-discretionary voting rule as dating back to 1937, reflecting a long-standing accommodation to the intermediated ownership structure. In the street-name holding system, the broker, bank, or nominee generally appears as the shareholder of record, while the underlying investor with economic ownership is the beneficial owner.^[9]

Broker discretionary voting predates the modern street-name ownership system, but its practical significance increased as share ownership became increasingly intermediated. In the 2009 NYSE Approval Order, the Commission cited data indicating that in 1976, approximately 71 percent of securities were held directly by record holders and approximately 29 percent through securities intermediaries. By contrast, the Commission cited data showing that, by the end of 2002, DTC had on deposit approximately 84 percent of shares issued by domestic NYSE-listed companies and approximately 88 percent of shares issued by domestic Nasdaq-listed companies.^[10] As the proportion of street-name holdings increased, the treatment of uninstructed shares by intermediaries became more significant to shareholder meeting mechanics. At the same time, the scope of matters treated as eligible for broker discretionary voting continued to narrow.

The modern narrowing of broker discretionary voting began when NYSE established its Proxy Working Group in 2005 to review the NYSE rules regulating the proxy voting process, with a focus on NYSE Rule 452. The Proxy Working Group recommended that director elections should no longer be treated as routine and that brokers should no longer be permitted to vote shares for beneficial owners who did not provide specific voting instructions. In making that recommendation, the Proxy Working Group also recognized that the proposed change could significantly affect the director election process, including by increasing the costs of uncontested elections and potentially increasing the influence of proxy advisory firms, special-interest groups or others with a particular agenda to challenge an incumbent board at the expense of smaller shareholders.^[11]

NYSE filed SR-NYSE-2006-92 in October 2006. After several amendments, the Commission approved the proposed rule change in the 2009 NYSE Approval Order, eliminating broker discretionary voting for director elections at shareholder meetings held on or after January 1, 2010, subject to the investment company exception. The Commission received 153 comment letters from 137 commenters on the proposal.^[12]

The Commission's approval order emphasized the importance of shareholder enfranchisement and the relationship between voting authority and economic interest. In approving the NYSE proposal, the Commission stated that having shareholders with an economic interest in the company vote the shares furthers the goal of enfranchising shareholders as opposed to brokers without such economic interest.^[13] At the same time, the comment record reflected concerns regarding quorum, solicitation costs, retail participation, proxy-advisor influence, and related aspects of the broader proxy voting process.^[14] Two Commissioners dissented, based in part on their concerns that eliminating broker discretionary voting could affect retail shareholder participation, quorum, solicitation costs, and the relative influence of third parties.^[15]

2009 NYSE Rule 452 Comment Record on Proportional Voting

The comment file for the 2009 NYSE Rule 452 amendments also demonstrates that proportional voting was a known and seriously discussed alternative to both broker discretionary voting and the complete exclusion of uninstructed shares. For example, the NYSE Proxy Working Group stated in its 2009 comment letter that it had discussed and considered proportional voting and that, following publication of its 2006 report, the Securities Industry and Financial Markets Association (“SIFMA”) issued a best-practices memo suggesting uninstructed retail shares be voted in proportion to shares voted by other retail shareholders rather than at the broker's discretion.^[16] The PWG Comment Letter further acknowledged that Broadridge data suggested proportional voting had a significant impact on companies' ability to attain a quorum, even if it had a limited impact on the outcome of director elections.

Other commenters also addressed proportional voting, with several commenters supporting proportional voting as an alternative to the NYSE proposal, arguing that it could better ( printed page 35597) reflect retail shareholder sentiment and reduce concerns about quorum and solicitation.^[17] Other commenters opposed proportional voting, raising concerns about vote integrity, disproportionate influence, and inconsistency with the principle commonly described as “one share, one vote.” ^[18]

In its approval of the 2009 NYSE Approval Order, the Commission also acknowledged concerns that proportional voting could have a distortive impact depending on how it was implemented, including whether the calculation reflected retail-only votes or a broader pool of account holders. At the same time, the Commission did not conclude that proportional voting was categorically inconsistent with the Act. Rather, the Commission stated that the existence of other reasonable alternatives did not render the NYSE proposal inconsistent with Section 6(b)(5).^[19]

The Exchange's proposal to amend Rule 13.003 addresses the implementation concerns reflected in the 2009 NYSE Approval Order. Unlike voluntary or broker-specific proportional voting practices discussed in 2009, proposed Rule 13.003(c) would prescribe a uniform methodology, apply on a proposal-by-proposal basis, exclude shares held or voted pursuant to fiduciary, advisory, ERISA, or other discretionary authority, and require records of the proportional allocation methodology.

Dodd-Frank Section 957 and Exchange Act Section 6(b)(10)

Following the 2009 amendments, the scope of broker discretionary voting continued to narrow. Section 957 of the Dodd-Frank Wall Street Reform and Consumer Protection Act directed national securities exchanges to adopt rules prohibiting members from voting uninstructed shares in connection with director elections, executive compensation, and other significant matters as determined by the Commission.^[20] Existing Rule 13.003(c) of the Exchange's rules reflects this prohibition and is retained in the proposed rule change, re-lettered as Rule 13.003(d).

The Senate Report accompanying Section 957 framed the relevant policy as preventing broker preferences from affecting the outcome of votes. The report states that final vote tallies should reflect the wishes of the beneficial owners of the stock, not those of the broker holding the shares.^[21]

The Commission repeated that principle in approving the rule changes that NYSE and Nasdaq proposed to address Section 957 of the Dodd-Frank Act. In those orders, the Commission quoted the Senate Report and concluded that NYSE's and Nasdaq's proposals furthered investor protection and the public interest by assuring that votes on matters covered by Section 6(b)(10) are made by those with an economic interest in the company, rather than by a broker without such economic interest.^[22]

The Exchange recognizes that Section 6(b)(10) of the Exchange Act requires the rules of a national securities exchange to prohibit any member that is not the beneficial owner of a security registered under Section 12 from granting a proxy to vote the security in connection with a shareholder vote on specified matters, unless the beneficial owner of the security has instructed the member to vote the proxy in accordance with the voting instructions of the beneficial owner. The proposed rule is designed to address that statutory concern by eliminating Member discretion. A Covered Member would not select a voting outcome, apply a house voting policy, follow management, or follow a third-party recommendation. Instead, the Covered Member would be required to apply a mandatory formula derived solely from voting instructions submitted by participating beneficial owners.

Existing Rule 13.003(b)(iii) permits a Member to give a proxy pursuant to the rules of another national securities exchange or association of which the Member is a member. Proposed Rule 13.003(c) would create a TXSE-specific requirement for covered Exchange-listed securities and therefore applies notwithstanding Rule 13.003(b)(iii). The Exchange is not proposing to eliminate Rule 13.003(b)(iii), as that provision would continue to apply outside the scope of proposed Rule 13.003(c). Existing Rule 13.003(c), re-lettered as Rule 13.003(d), would retain the Exchange's prohibition on discretionary voting for matters covered by Exchange Act Section 6(b)(10). The proposed amendment to re-lettered Rule 13.003(d) clarifies that the mandatory proportional allocation required by proposed Rule 13.003(c) is not an exercise of Member discretion.

This history informs the proposed rule. The proposed rule would replace Member discretion with a mandatory, formula-driven allocation based on voting instructions submitted by participating beneficial owners. In doing so, the proposed rule is designed to reaffirm the policy that vote treatment should be derived from beneficial-owner preferences and not from Member judgment or preference.

Policy Considerations

The Exchange believes the proposed rule advances the policy objectives underlying the Act and is consistent with both the principles articulated by the Commission in the 2009 NYSE Approval Order and by Congress in Section 957 of the Dodd-Frank Act. Depending on the proposals on the ballot and their classification under NYSE Rule 452, the absence of voting instructions from a beneficial owner may affect the determination of a quorum, increase the effective approval threshold for a proposal, reduce the relative influence of beneficial owners who submit voting instructions, or result in shares not being represented at the meeting at all. The treatment of an ( printed page 35598) uninstructed share is therefore not neutral, it is determined by the incidental composition of the meeting agenda and by classification decisions made by another self-regulatory organization on a case-by-case basis. Compounding this concern, the routine/non-routine classification does not consistently track the practical or economic significance of the proposal to beneficial owners and matters with meaningful economic consequences, including reverse stock splits and increases in authorized common stock for general corporate purposes, some of which may be treated as routine and therefore subject to broker discretionary voting.

The proposed rule addresses these concerns by replacing proposal-dependent treatment with a uniform methodology that applies the same formula to every matter submitted to a shareholder vote and that is derived solely from the voting instructions submitted by participating beneficial owners. In doing so, the proposed rule eliminates Member discretion in the voting of uninstructed shares. Rather than voting in accordance with its own judgment, the recommendations of the issuer's management, the recommendations of any third party, or any house voting policy, a Covered Member would apply a prescribed formula derived solely from voting instructions submitted by participating beneficial owners. In this respect, the proposed rule advances the principle that the outcome of shareholder votes should be determined by the beneficial owners rather than by intermediaries. The proposed rule applies that principle uniformly to every matter submitted to a shareholder vote on TXSE-listed securities, including matters that remain eligible for broker discretionary voting under the current framework, and reflects an approach that is not novel: proportional voting was identified as a known alternative in the 2009 NYSE Rule 452 comment record, and certain broker-dealers have voluntarily applied proportional methodologies when exercising discretionary authority on routine matters.^[23]

The proposed rule is neutral as to voting choice. It does not favor management, opposition, or any shareholder proponent, and does not guarantee support for, or opposition to, any board recommendation. The Exchange acknowledges that the proposed rule will have some effect on voting outcomes, as any rule governing the treatment of uninstructed shares necessarily does. The proposed rule is, however, structurally neutral as among the parties seeking to influence those outcomes. Nor does the proposed rule impair the rights of any shareholder or shareholder proponent: it does not limit the ability of any shareholder to vote, abstain, withhold, or otherwise provide voting instructions, and it does not eliminate or restrict shareholder proposals or the rights of any party to present matters to a vote. The proposed rule preserves the distinction between affirmative silence (an instruction to abstain or, in the case of director elections, to withhold) and non-response, treating the former as an instruction reflected in the allocation calculation in the same manner as a vote FOR or AGAINST, and thereby prevents the dilution of the influence of beneficial owners who have engaged with the proxy materials.

The proposed rule is also consistent with the policy reflected in Section 957 of the Dodd-Frank Act, which directed national securities exchanges to adopt rules prohibiting members from voting uninstructed shares in connection with director elections, executive compensation, and other significant matters as determined by the Commission. The Senate Report accompanying Section 957 framed the relevant policy as ensuring that final vote tallies reflect the wishes of the beneficial owners of the stock rather than those of the broker holding the shares. The proposed rule reaffirms that policy and extends its underlying principle to the matters that remain eligible for broker discretionary voting under the current framework, including ratification of auditors, certain stock splits and reverse stock splits, increases in authorized common stock, adjournments, and a limited number of other matters. The Exchange notes that Section 957 does not prescribe how uninstructed shares should or should not be treated outside those covered matters, and notwithstanding the scope of its specific prohibitions, the proposed rule operates within the latitude left by the statute. By eliminating the variation in voluntary proportional voting practices that has developed under the current framework and reducing reliance on proposal-by-proposal classification determinations by another self-regulatory organization, the proposed rule provides a uniform, transparent, and consistently applied approach to the treatment of uninstructed shares in TXSE-listed securities.

2. Statutory Basis

The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act,^[24] in general, and furthers the objectives of Section 6(b)(5) of the Act,^[25] in particular, in that it is 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 that the proposed rule change is consistent with Section 6(b)(10) of the Act,^[26] which addresses the voting of proxies on behalf of beneficial owners by members of national securities exchanges.

The Exchange believes the proposed rule is consistent with Section 6(b)(5) because it replaces a proposal-dependent framework for the treatment of uninstructed shares with a uniform methodology that applies the same formula to every matter submitted to a shareholder vote. Under the current framework, the absence of voting instructions from a beneficial owner may, depending on the proposals on the ballot and their classification under NYSE Rule 452, affect the determination of a quorum, increase the effective approval threshold for a proposal, reduce the relative influence of beneficial owners who submit voting instructions, or result in shares not being represented at the meeting at all. The proposed rule removes these proposal-dependent effects by prescribing a single methodology that applies to every matter submitted to a vote and that is derived solely from the voting instructions submitted by participating beneficial owners. The Exchange believes that this uniform treatment promotes just and equitable principles of trade and removes impediments to a free and open market by ensuring that the treatment of uninstructed shares is determined by a transparent and consistently applied formula rather than by the composition of the meeting agenda and the classification decisions of another self-regulatory organization.

The Exchange further believes the proposed rule is consistent with Section 6(b)(5) because it protects investors and the public interest by eliminating a Covered Member discretion in the voting of uninstructed shares and by ( printed page 35599) ensuring that the voting instructions of participating beneficial owners are the only inputs to the allocation of a Covered Member. A Covered Member would not vote in accordance with its own judgment, the recommendations of the issuer's management, the recommendations of any third party, or any house voting policy. The Covered Member would apply a prescribed formula derived solely from voting instructions submitted by participating beneficial owners. In this respect, the proposed rule advances the principle, articulated by the Commission in the 2009 NYSE Approval Order, that the outcome of shareholder votes should be determined by those with an economic interest in the issuer rather than by intermediaries without such an interest, and applies that principle uniformly to every matter submitted to a vote, including matters that remain eligible for broker discretionary voting under the current framework. The proposed rule is also neutral as to voting direction. It does not favor management, opposition, or any shareholder proponent, and does not guarantee support for, or opposition to, any board recommendation, rather, the allocation moves in the direction of the instructions submitted by participating beneficial owners. The proposed rule does not impair the rights of any shareholder or shareholder proponent, as it does not limit the ability of any shareholder to vote, abstain, withhold, or otherwise provide voting instructions, nor does it eliminate or restrict shareholder proposals or the rights of any party to present matters to a vote. The proposed rule preserves the distinction between affirmative silence (an instruction to abstain or, in the case of director elections, to withhold) and non-response, treating the former as an instruction reflected in the allocation calculation in the same manner as a vote FOR or AGAINST, and thereby prevents the dilution of the influence of beneficial owners who have engaged with the proxy materials.

The Exchange believes the proposed rule is consistent with Section 6(b)(10) because it does not authorize Members that are not beneficial owners to exercise discretionary voting authority on the matters covered by that provision in the absence of beneficial-owner instructions. The Exchange is retaining the existing prohibition required by Section 6(b)(10) in re-lettered Rule 13.003(d), which carries forward the substance of existing Rule 13.003(c) without modification of its scope. The mandatory proportional allocation required by proposed Rule 13.003(c) is consistent with Section 6(b)(10) because it does not involve the exercise of Member discretion. A Covered Member would not select a voting outcome, apply a house voting policy, follow management, or follow a third-party recommendation, but would instead apply a mandatory formula derived exclusively from voting instructions submitted by participating beneficial owners.^[27] The proposed rule expressly clarifies in re-lettered Rule 13.003(d) that the mandatory proportional allocation required under proposed Rule 13.003(c) does not constitute the granting of a proxy to vote at the Member's discretion because the Covered Member exercises no judgment, preference, or discretion in determining the votes cast for the uninstructed shares.

The Exchange further believes the proposed rule is consistent with the policy reflected in Section 957 of the Dodd-Frank Act, which directed national securities exchanges to adopt rules prohibiting members from voting uninstructed shares in connection with director elections, executive compensation, and other significant matters as determined by the Commission. The Senate Report accompanying Section 957 framed the relevant policy as ensuring that final vote tallies reflect the wishes of the beneficial owners of the stock rather than those of the broker holding the shares, and the Commission reiterated this principle in approving the NYSE and Nasdaq conforming rule amendments. The proposed rule reaffirms that policy and extends its underlying principle to the matters that remain eligible for broker discretionary voting under the current framework, including ratification of auditors, certain stock splits and reverse stock splits, increases in authorized common stock, adjournments, and a limited number of other matters. The Exchange notes that Section 957 does not prescribe how uninstructed shares should or should not be treated outside the scope of its specific prohibitions, and the proposed rule operates within the latitude left by the statute.

The Exchange acknowledges that the Commission considered proportional voting in the 2009 NYSE Rule 452 proceeding and did not adopt it at that time. The Commission did not, however, conclude that proportional voting was categorically inconsistent with the Act; rather, the Commission stated that the existence of other reasonable alternatives did not render the NYSE proposal inconsistent with Section 6(b)(5). The Exchange believes the proposed rule addresses the implementation concerns reflected in the comment record of that proceeding. Unlike the voluntary or broker-specific proportional voting practices discussed in 2009, proposed Rule 13.003(c) prescribes a uniform methodology, applies on a proposal-by-proposal basis, excludes shares held or voted pursuant to fiduciary, advisory, ERISA, or other discretionary authority, requires Covered Members to maintain records of the proportional allocation methodology applied, and operates within the prohibitions of Section 6(b)(10) by eliminating Member discretion entirely.

Finally, the Exchange believes that the proposed corresponding numbering changes are consistent with the Act because they make the Exchange's Rules more clear and understandable.

For these reasons, the Exchange believes that the proposed changes are consistent with the Act.

(B) Self-Regulatory Organization's Statement on Burden on Competition

The Exchange 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.

The proposed rule applies uniformly to all Members that hold shares of TXSE-listed equity securities on behalf of beneficial owners. All Covered Members are subject to the same proportional allocation methodology and the same recordkeeping requirements. The proposed rule does not advantage any Member or class of Members relative to any other, and it does not impose differential obligations based on Member size, business model, or customer composition. Accordingly, the Exchange does not believe the proposed rule imposes any burden on intramarket competition.

The proposed rule also does not impose any burden on intermarket competition. The proposed rule governs the conduct of TXSE Members in connection with the voting of uninstructed shares of TXSE-listed equity securities. Other exchanges may at any time choose to adopt this proposal, retain existing rules, or otherwise modify its own rules in this area. To the extent the proposed rule reflects a different approach to the treatment of uninstructed shares than the approach adopted by other national securities exchanges, the Exchange believes that such differentiation is consistent with the purposes of the Act ( printed page 35600) and reflects appropriate competition among self-regulatory organizations in establishing the rules applicable to securities listed on their respective markets.

The Exchange does not believe the proposed rule imposes any burden on competition among issuers. The proposed rule applies uniformly to all TXSE-listed equity securities subject to its scope and does not distinguish among issuers based on size, industry, capital structure, or any other characteristic. The proposed rule does not alter the substantive rights of issuers, shareholders, or shareholder proponents, and does not affect the ability of any issuer to submit any matter to a shareholder vote or the ability of any shareholder to vote, abstain, withhold, or otherwise provide voting instructions on any such matter.

For the foregoing reasons, the Exchange 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

The Exchange has neither solicited nor received written 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 (https://www.sec.gov/​rules/​sro.shtml); or
• Send an email torule-comments@sec.gov. Please include file number SR-TXSE-2026-008 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-TXSE-2026-008. 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 website ( https://www.sec.gov/​rules/​sro.shtml). Copies of the filing will be available for inspection and copying at the principal office of the Exchange. Do not include personal identifiable information in submissions; you should submit only information that you wish to make available publicly. We may redact in part or withhold entirely from publication submitted material that is obscene or subject to copyright protection. All submissions should refer to file number SR-TXSE-2026-008 and should be submitted on or before July 2, 2026.