FR Doc E5-3432

[Federal Register: June 30, 2005 (Volume 70, Number 125)]
[Notices]
[Page 37889-37891]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr30jn05-130]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51912; File No. SR-NSX-2005-03]

Self-Regulatory Organizations; National Stock Exchange; Notice of
Filing of Proposed Rule Change, and Amendments No. 1 and 2 Thereto,
Relating to the Ongoing Qualification of the Members of NSX's Board of
Directors

June 23, 2005.
Pursuant to Section 19(b)(1) of 1934 (``Act'') \1\ and Rule 19b-4
thereunder,\2\ notice is hereby given that on May 13, 2005, the
National Stock Exchange^SM (the ``Exchange'' or ``NSX''
^SM) filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by NSX. On June 10, 2005,
the Exchange filed Amendment No. 1 to the proposed rule change.\3\ On
June 21, 2005, the Exchange filed Amendment No. 2 to the proposed rule
change.\4\ The Commission is publishing this notice to solicit comments
on the proposed rule change, as amended, from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ In Amendment No. 1, the Exchange clarified certain language
in Section 3(a) of the proposed rule change, made conforming changes
to Exhibit 1 to the proposed rule change and corrected page
numbering errors in the initial filing.
\4\ In Amendment No. 2, the Exchange revised the proposed rule
text, as well as, the proposed rule change's statutory basis
section.
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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 Article V, Section 3 of its By-Laws
which pertains to the ongoing qualification of the members of its Board
of Directors (``Board''). Below is the amended text of the proposed
rule change. Proposed new language is in italics.\5\
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\5\ The reference to ``Independent Director'' in proposed
Article V, Section 3(b)(2) of the NSX By-Laws is based upon the
Commission's prior approval of Securities Exchange Act Release No.
51765 (May 31, 2005), 70 FR 33238 (June 7, 2005) (SR-NSX-2005-02).
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* * * * *
CODE OF REGULATIONS (BY-LAWS) OF NATIONAL STOCK EXCHANGE
* * * * *
ARTICLE V
Exchange Organization and Administration
* * * * *
Section 3. Vacancies
(a) Any intraterm vacancy that may occur on the Board caused by
death, resignation or otherwise shall be filled by the Directors then
in office by a person having the same qualifications, as set forth in
Section 1of Article V of these By-Laws, as those of the Director whose
seat is vacant. The person selected to fill such vacancy shall serve
the remaining term of office.
(b) In the event any Director fails to maintain the qualifications
of his designated category, as set forth in Section 1 of Article V of
these By-Laws, of which failure the Board shall be the sole judge, the
Director shall, upon determination of the Board that the Director is no
longer qualified, cease to be a Director, his office shall become
vacant and (effective upon the expiration of the grace period for
requalification set forth in Subsection (1) below), the vacancy may be
filled by the Board with a person who qualifies for the category in
which the vacancy exists.
(1) A Director who fails to maintain the applicable qualifications
will be allowed the later of (i) 45 days from the date when the Board
determines the Director is no longer qualified or (ii)

[[Page 37890]]

until the next regular Board meeting following the date when the Board
makes such determination, in which to requalify and thereafter continue
to serve the remainder of such Director's term. During any such period
up until the time when the Director requalifies, the Director shall be
deemed not to hold office and the seat formerly held by the Director
shall be deemed to be vacant for all purposes. The Board shall be the
sole judge of whether the Director has requalified.
(2) A Director (other than an Independent Director) whose
membership has been suspended does not lose his qualification by reason
of such suspension during the period of suspension.
* * * * *

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 proposal and discussed
any comments it received on the proposed rule change, as amended. 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 is proposing to amend its By-Laws pertaining to the
ongoing qualification of the members of its Board. Under the proposal,
Article V, Section 3 of the NSX By-Laws would be amended to provide
that if a Director fails to maintain the necessary qualifications of
his respective category,\6\ the Director will cease to be a Director
upon determination by the Board that the Director is no longer
qualified and his office shall become vacant. The proposal will also
provide the later of 45 days or until the next regular Board meeting
for a Director who is no longer qualified for a designated category to
requalify. During any period in which a Director is not qualified for a
designated category, the Director shall be deemed not to hold office
and the position formerly held by the Director shall be deemed vacant
for all purposes. Under the proposal, the Board will be the sole judge
of whether a Director is no longer qualified for his designated
category and whether a Director has requalified. Effective upon the
expiration of the grace period for requalification, the Board may also
fill any resulting vacancy with a person who qualifies for the category
in which the vacancy exists. Finally, the proposal would provide that a
Director (other than an Independent Director) whose membership has been
suspended does not lose his qualification by reason of such suspension
during the period of suspension. Rather, such Director may remain a
Director during the suspension unless he is removed.\7\
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\6\ The Board is currently composed of thirteen voting
Directors. Those Directors are categorized as follows: ``(a) the
Exchange President; (b) two Proprietary Members with certificates,
or executive officers of Proprietary Member organizations with
certificates, who are Designated Dealers in the National Securities
Trading System (`Designated Dealer Directors'); (c) one Proprietary
Member with certificate or an executive officer of a Proprietary
Member organization with certificate, who conducts a nonmember
public customer business on the Exchange (`At-Large Director'); (d)
the Chairman of [the Chicago Board Options Exchange] (`CBOE
Director'); (e) the President of CBOE (`CBOE Director'); (f) four
CBOE members or executive officers of CBOE member organizations
(`CBOE Directors'); and (g) three representatives of issuers and
investors who shall not be associated with any member of the
Exchange or with any registered broker or dealer or with another
self-regulatory organization, other than as a public trustee or
director (`Public Directors'). Excepting affiliations with national
securities exchanges, no two or more Directors may be partners,
officers of directors of the same person or be affiliated with the
same person.'' See Article V, Section 1.1 of the NSX By-Laws. The
Exchange is proposing to make various changes to the composition of
the Board in a separate rule proposal, which is currently pending
before the Commission. See Securities Exchange Act Release No. 51765
(May 31, 2005), 70 FR 33238 (June 7, 2005) (SR-NSX-2005-02). Through
that proposal, the composition of the Board is proposed to be
revised to consist of the NSX Chief Executive Officer; three Member
Directors; six Independent Directors; and three CBOE Directors.
\7\ A Director may be removed with cause by a majority vote of
those individuals or entities entitled to vote to elect such
Director. See Article V, Section 4 of the NSX By-Laws.
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2. Statutory Basis
The Exchange believes the proposed rule change, as amended,
enhances the fair and efficient governance of the Exchange. Therefore,
NSX believes the proposed rule change, as amended, furthers the
objectives of Section 6(b) of the Act,\8\ in general, and Section
6(b)(3),\9\ in particular, in that it assures a fair representation of
its members in the selection of it directors and administration of its
affairs. The proposed rule change also furthers the objectives of
Section 6(b)(1),\10\ in that it helps to assure that the Exchange is so
organized and has the capacity to be able to carry out the purposes of
the Act and to comply, and to enforce compliance by its members, with
the Act.
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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(3).
\10\ 15 U.S.C. 78f(b)(1).
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B. Self-Regulatory Organization's Statement on Burden on Competition

The Exchange does not believe that the proposed rule change, as
amended, will impose any inappropriate burden on competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others

No written comments were solicited or received in connection with
the proposed rule change, as amended.

III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action

Within 35 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date 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 such proposed rule change, as amended; or
(b) Institute proceedings to determine whether the proposed rule
change, as amended, 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, as amended, 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 rule-comments@sec.gov. Please include

File Number SR-NSX-2005-03 on the subject line.

Paper Comments

Send paper comments in triplicate to Jonathan G. Katz,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-9303.
All submissions should refer to File Number SR-NSX-2005-03. 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

[[Page 37891]]

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, as amended, that are filed with the Commission, and all written
communications relating to the proposed rule change, as amended,
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 inspection and copying in the Commission's
Public Reference Room. Copies of such filing also will be available for
inspection and copying at the principal office of NSX. 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-NSX-2005-03 and should be
submitted on or before July 21, 2005.

For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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J. Lynn Taylor,
Assistant Secretary.
[FR Doc. E5-3432 Filed 6-29-05; 8:45 am]

BILLING CODE 8010-01-P