Daily Rules, Proposed Rules, and Notices of the Federal Government


[Release No. 34-60247; File No. SR-BX-2009-021]

Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Order Approving Proposed Rule Change to Amend the Restated Certificate of Incorporation and By-Laws of NASDAQ OMX BX, Inc.

On April 29, 2009, NASDAQ OMX BX, Inc. ("BX" or "Exchange") 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 amend its Restated Certificate of Incorporation ("Certificate") and by-laws ("By-Laws"). The proposed rule change was published for comment in theFederal Registeron May 19, 2009.3 The Commission received no comments regarding the proposal. This order approves the proposed rule change.
I. Description of the Proposed Rule Change

On August 29, 2008, The NASDAQ OMX Group, Inc. ("NASDAQ OMX") acquired BX. Since then, the boards of BX and its parent company, NASDAQ OMX, have maintained their own audit committee and management compensation committee. As more fully discussed in the Notice, the Exchange states that it has found the work of these committees to overlap substantially.4 As a result, BX proposes to revise its By-Laws to allow for the elimination of its audit and management compensation committees. In addition, BX proposes to amend its Certificate and By-Laws to reflect the name change of The Nasdaq Stock Market, Inc. to The NASDAQ OMX Group, Inc. II.

Discussion and Commission Findings

After careful review, the Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange.5 In particular, the Commission finds that the proposed rule change is consistent with Section 6(b)(1) of the Act,6 which requires a national securities exchange to be so organized and have the capacity 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 Commission also finds that the proposed rule change is consistent with Section 6(b)(5) of the Act,7 in that it is designed, among other things, to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, 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 Commissionpreviously approved a structure in which certain committees of the board of directors of NYSE Euronext, including the audit and compensation committees, were authorized to perform functions for various subsidiaries, including the New York Stock Exchange, LLC ("NYSE").8

The BX Audit Committee.Currently, the BX audit committee is primarily charged with: (1) Overseeing BX's financial reporting process; (2) overseeing the systems of internal controls established by management and the BX board, as well as the legal and compliance process; (3) selection and evaluation of independent auditors; and (4) direction and oversight of the internal audit function. BX states that the NASDAQ OMX audit committee9 will assume the duties currently performed by the BX audit committee once that committee is eliminated. The Exchange states that the responsibilities of BX's audit committee are fully duplicated by the responsibilities of the NASDAQ OMX audit committee.10 In addition, BX states that its regulatory oversight committee has broad authority to oversee the adequacy and effectiveness of BX's regulatory and self-regulatory organization responsibilities, and therefore is able to maintain oversight over internal controls in tandem with the NASDAQ OMX audit committee. Further, BX states that the practice of NASDAQ OMX's Internal Audit Department ("Department"),11 which performs internal audit functions for all NASDAQ OMX subsidiaries, is to report to the BX regulatory oversight committee on all internal audit matters relating to BX, which will be formally reflected in the Department's written procedures. BX also represents that, to ensure that the BX board retains authority to direct the Department's activities with respect to BX, the Department's written procedures will be amended to stipulate that the BX regulatory oversight committee may, at any time, direct the Department to conduct an audit of a matter of concern to it and report the results of the audit both to the BX regulatory oversight committee and the NASDAQ OMX audit committee.12

BX Management Compensation Committee.BX also proposes to eliminate its compensation committee, and to prescribe that the functions of that committee be performed by the NASDAQ OMX compensation committee or the full BX board, when required. The NASDAQ OMX By-Laws provide that its compensation committee considers and recommends compensation policies, programs, and practices for employees of NASDAQ OMX. According to BX, many employees performing work for BX are also employees of NASDAQ OMX, and certain senior officers of BX are also officers of NASDAQ OMX and other NASDAQ OMX subsidiaries because their responsibilities relate to multiple entities within the NASDAQ OMX corporate structure.13 As a result, NASDAQ OMX establishes compensation and compensation policy for these employees.

To the extent that policies, programs, and practices must be established for any BX officers or employees who are not also NASDAQ OMX officers or employees, BX states that the BX Board will perform such actions without the use of a compensation committee, subject to recusal by Staff Directors,14 unless the persons in question are also employees of Boston Options Exchange Regulation LLC ("BOXR").15

The Commission notes that the proposed elimination of the BX audit and management compensation committees is comparable to a structure for the NYSE that the Commission previously considered and approved.16 The Commission finds that the proposed elimination of the BX's audit and management compensation committees is consistent with the Exchange Act.

II. Conclusion

It is therefore ordered,pursuant to Section 19(b)(2) of the Act,17 that the proposed rule change (SR-BX-2009-021) be, and it hereby is, approved.

For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.18

1817 CFR 200.30-3(a)(12).

Elizabeth M. Murphy, Secretary.
ACTION: 1715 U.S.C. 78s(b)(2).