[Federal Register Volume 75, Number 130 (Thursday, July 8, 2010)]
[Notices]
[Pages 39299-39301]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-16533]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62400; File No. SR-BX-2010-042]
Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Amend the
BOX LLC Agreement
June 29, 2010.
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 June 28, 2010, NASDAQ OMX BX, Inc. (the ``Exchange'') filed with the
Securities and Exchange Commission (``Commission'') the proposed rule
change as described in Items I and II below, which Items have been
prepared by the self-regulatory organization. The Exchange filed the
proposed rule change pursuant to Section 19(b)(3)(A) of the Act,\3\ and
Rule 19b-4(f)(6) thereunder,\4\ which renders the proposal effective
upon filing with the Commission. The Commission is publishing this
notice to solicit comments on the proposed rule from interested
persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A).
\4\ 17 CFR 240.19b-4(f)(6).
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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 the proposed Sixth Amended and
Restated Operating Agreement (``BOX LLC Agreement''), of the Boston
Options Exchange Group LLC (``BOX LLC''), in connection with the
restructuring of subsidiary holding companies by the Montreal Exchange
Inc.,\5\ a company incorporated in Qu[eacute]bec, Canada (``MX''),
solely involving MX subsidiaries indirectly holding ownership interests
in BOX LLC. The text of the proposed rule change is available from the
principal office of the Exchange, at the Commission's Public Reference
Room and also on the Exchange's Internet Web site at http://nasdaqomxbx.cchwallstreet.com/NASDAQOMXBX/Filings/.
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\5\ The Montr[eacute]al Exchange Inc. is also known in French as
the Bourse de Montr[eacute]al Inc.
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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 self-regulatory organization
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 self-regulatory organization
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
On January 13, 2004, the Commission approved four Exchange
proposals that together established, through an operating agreement
among its owners, a Delaware limited liability company, BOX LLC, to
operate BOX as an options trading facility of the Exchange.\6\
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\6\ See Securities Exchange Act Release No. 49066 (January 13,
2004), 69 FR 2773 (January 20, 2004) (establishing a fee schedule
for the proposed BOX facility); Securities Exchange Act Release No.
49065 (January 13, 2004), 69 FR 2768 (January 20, 2004) (creating
Boston Options Exchange Regulation LLC to which the Exchange would
delegate its self-regulatory functions with respect to the BOX
facility); Securities Exchange Act Release No. 49068 (January 13,
2004), 69 FR 2775 (January 20, 2004) (approving trading rules for
the BOX facility); Securities Exchange Act Release No. 49067
(January 13, 2004), 69 FR 2761 (January 20, 2004) (approving certain
regulatory provisions of the operating agreement of BOX LLC).
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Prior to the Transfer (as defined below), MX held (i) 100% of the
common stock of MX US 1, Inc., a Delaware corporation, (ii) 100% of the
common shares of 3226506 Nova Scotia Company, a Nova Scotia unlimited
liability company (``NSULC 1'') and (iii) 100% of the preferred shares
and 99.9% of the common shares of 3226507 Nova Scotia Company, a Nova
Scotia unlimited liability company (``NSULC 2''). NSULC 1 held 0.1% of
the common shares of NSULC 2. MX US 1, Inc. held 100% of the common
stock of MX US 2, Inc., a Delaware corporation, and NSULC 2 owned 100%
of the preferred stock of MX US 2, Inc. MX US 2, Inc. held a 53.83%
ownership interest in BOX LLC.\7\
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\7\ See Securities Exchange Act Release No. 58822 (Oct. 21,
2008), 73 FR 63742 (Oct. 27, 2008) (SR-BSE-2008-47) (approving BOX
purchase and cancellation of units held by a BOX LLC member
resulting in increased ownership interest of the other members of
the BOX LLC Agreement).
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Upon effectiveness of this rule filing, MX is expected to effect a
series of transactions resulting in a new ownership structure (the
``Transfer''). Following the Transfer, the ownership structure by which
MX will indirectly control MX US 2, Inc. will be as follows: MX will
hold 100% of the common stock of MX US 1, Inc. MX US 1, Inc. will hold
(i) 100% of the equity of MX US 1, LLC, a Delaware limited liability
company, and (ii) 100% of the common stock of MX US 2, Inc. NSULC 1
will be dissolved and its assets will be distributed to MX US 1, LLC.
MX US 1, LLC will hold 100% of the equity of MX US 2, LLC, a Delaware
limited liability company (formerly NSULC 2). MX US 2, LLC will hold
100% of the preferred stock of MX US 2, Inc. MX US 2, Inc. will hold a
53.83% ownership interest in BOX LLC.
The Exchange is submitting the proposed rule change to the
Commission to amend the BOX LLC Agreement pursuant to the proposed
Instruments of Accession in connection with the Transfer. As a result
of the Transfer, MX US 1, LLC and MX US 2, LLC will be indirect,
wholly-owned subsidiaries of MX.
Pursuant to Section 8.4(g) of the BOX LLC Agreement, as previously
approved by the Commission, BOX LLC is required to amend the BOX LLC
Agreement to make a Controlling Person \8\ a party to the BOX LLC
Agreement if such Controlling Person establishes a Controlling Interest
\9\ in any BOX Member that, alone or together with any Affiliate of
such BOX Member, holds a Percentage Interest in BOX
[[Page 39300]]
equal to or greater than 20%.\10\ Pursuant to the Transfer, MX US 1,
LLC has acquired a Controlling Interest in MX US 2, LLC, which owns
100% of the preferred shares of MX US 2, Inc., which owns a 53.83%
Controlling Interest in BOX LLC. MX US 1, LLC and MX US 2, LLC, as
Controlling Persons, are required to be and will become parties to the
BOX LLC Agreement pursuant to the proposed Instruments of Accession. As
a result, MX US 1, LLC and MX US 2, LLC will agree to abide by all the
provisions of the BOX LLC Agreement, including those provisions
requiring submission to the jurisdiction of the Commission.\11\
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\8\ A ``Controlling Person'' is defined as ``a Person who, alone
or together with any Affiliate of such Person, holds a controlling
interest in a [BOX] Member.'' See Section 8.4(g)(v)(B), BOX LLC
Agreement.
\9\ A ``Controlling Interest'' is defined as ``the direct or
indirect ownership of 25% or more of the total voting power of all
equity securities of a Member (other than voting rights solely with
respect to matters affecting the rights, preferences, or privileges
of a particular class of equity securities), by any Person, alone or
together with any Affiliate of such Person.'' See Section
8.4(g)(v)(A), BOX LLC Agreement.
\10\ See Section 8.4(g), BOX LLC Agreement.
\11\ The BOX LLC Agreement states, in part, that ``the Members,
officers, directors, agents, and employees of Members irrevocably
submit to the exclusive jurisdiction of the U.S. Federal courts,
U.S. Securities and Exchange Commission, and the Boston Stock
Exchange, for the purposes of any suit, action or proceeding
pursuant to U.S. Federal securities laws, the rules or regulations
thereunder, arising out of, or relating to, BOX activities or
Article 19.6(a), (except that such jurisdictions shall also include
Delaware for any such matter relating to the organization or
internal affairs of BOX, provided that such matter is not related to
trading on, or the regulation, of the BOX Market), and hereby waive,
and agree not to assert by way of motion, as a defense or otherwise
in any such suit, action or proceeding, any claims that they are not
personally subject to the jurisdiction of the U.S. Securities and
Exchange Commission, that the suit, action or proceeding is an
inconvenient forum or that the venue of the suit, action or
proceeding is improper, or that the subject matter hereof may not be
enforced in or by such courts or agency.'' See BOX LLC Agreement,
Section 19.6.
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For the reasons stated above, the Exchange is submitting to the
Commission the proposed Instruments of Accession to the BOX LLC
Agreement as a rule change.
2. Basis
The Exchange believes that the proposal is consistent with the
requirements of Section 6(b) of the Act,\12\ in general, and furthers
the objectives of Section 6(b)(1),\13\ in particular, in that it
enables the Exchange to be so organized so 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 exchange members and persons associated with
its exchange members, with the provisions of the Act, the rules and
regulations thereunder, and the rules of the Exchange. The Exchange
also believes that this filing furthers the objectives of Section
6(b)(5) of the Act \14\ in that it is designed to facilitate
transactions in securities, 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 believes that the proposed rule change to amend the BOX
LLC Agreement to make MX US 1, LLC and MX US 2, LLC parties to the BOX
LLC Agreement, pursuant to the proposed Instruments of Accession,
should provide the Commission with sufficient authority over changes in
control of BOX LLC to enable the Commission to carry out its regulatory
oversight responsibilities with respect to BX and the BOX facility.
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\12\ 15 U.S.C. 78f(b).
\13\ 15 U.S.C. 78f(b)(5)[sic].
\14\ 15 U.S.C. 78f(b)(5).
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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 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 comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change: (1) Does not
significantly affect the protection of investors or the public
interest; (2) does not impose any significant burden on competition;
and (3) by its terms does not become operative for 30 days after the
date of this filing, or such shorter time as the Commission may
designate if consistent with the protection of investors and the public
interest, the proposed rule change has become effective pursuant to
Section 19(b)(3)(A) \15\ of the Act and Rule 19b-4(f)(6)
thereunder.\16\
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\15\ 15 U.S.C. 78s(b)(3)(A).
\16\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to provide the Commission
with written notice of its intent to file the proposed rule change,
along with a brief description and text of the proposed rule change,
at least five business days prior to the date of filing of the
proposed rule change, or such shorter time as designated by the
Commission. The Exchange has met this requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) \17\ normally
may not become operative prior to 30 days after the date of filing.
However, Rule 19b-4(f)(6)(iii) \18\ permits the Commission to designate
a shorter time if such action is consistent with the protection of
investors and the public interest. The Exchange requests that the
Commission waive the 30-day operative delay, as specified in Rule 19b-
4(f)(6)(iii),\19\ which would make the rule change effective and
operative upon filing. The Commission believes that waiving the 30-day
operative delay is consistent with the protection of investors and the
public interest because the Exchange has represented that the Transfer
is anticipated to be consummated on June 29, 2010.\20\ In addition, the
proposed rule change to amend the BOX LLC Agreement to make MX US 1,
LLC and MX US 2, LLC parties to the BOX LLC Agreement, pursuant to the
proposed Instruments of Accession, should provide the Commission with
sufficient authority over changes in control of BOX LLC to enable the
Commission to carry out its regulatory oversight responsibilities with
respect to BX and the BOX facility. Accordingly, the Commission
designates the proposed rule change operative upon filing with the
Commission.
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\17\ 17 CFR 240.19b-4(f)(6).
\18\ 17 CFR 240.19b-4(f)(6)(iii).
\19\ Id.
\20\ For purposes only of waiving the operative delay for this
proposal, the Commission has considered the proposed rule's impact
on efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of such proposed rule
change, the Commission may summarily abrogate such rule change if it
appears to the Commission that such action is necessary or appropriate
in the public interest, for the protection of investors, or otherwise
in furtherance of the purposes of the Act.
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 e-mail to [email protected]. Please include
File Number SR-BX-2010-042 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary,
[[Page 39301]]
Securities and Exchange Commission, 100 F Street, NE., Washington, DC
20549-1090.
All submissions should refer to File Number SR-BX-2010-042. This file
number should be included on the subject line if e-mail 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
a.m. and 3 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-BX-2010-042 and should be
submitted on or before July 29, 2010.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
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\21\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-16533 Filed 7-7-10; 8:45 am]
BILLING CODE 8010-01-P