[Federal Register Volume 82, Number 171 (Wednesday, September 6, 2017)]
[Notices]
[Pages 42206-42219]
[FR Doc No: 2017-18790]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81496; File No. SR-BatsEDGA-2017-22]

Self-Regulatory Organizations; Bats EDGA Exchange, Inc.; Notice
of Filing of a Proposed Rule Change, as Modified by Amendment No. 1, To
Harmonize the Corporate Governance Framework With That of Chicago Board
Options Exchange, Incorporated and C2 Options Exchange Incorporated

August 30, 2017.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on August 23, 2017, Bats EDGA Exchange, Inc. (``Exchange'' or
``EDGA'') 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 Exchange. On August 25,
2017, the Exchange filed Amendment No. 1 to the proposed rule change.
The Commission is publishing this notice to solicit comments on the
proposed rule change, as modified by Amendment No. 1, from interested
persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Exchange filed a proposal to amend and restate its certificate
of incorporation and bylaws, as well as amend its Rules.
    The text of the proposed rule change is available at the Exchange's
Web site at www.bats.com, at the principal office of the Exchange, and
at the Commission's Public Reference Room.

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 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 Exchange has prepared summaries, set forth in
Sections A, B, and C below, of the most significant parts of such
statements.

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

1. Purpose
    EDGA submits this rule filing to the Securities and Exchange
Commission (the ``Commission'') in connection with a corporate
transaction (the ``Transaction'') involving, among other things, the
recent acquisition of EDGA along with Bats BYX Exchange, Inc. (``Bats
BYX''), Bats BZX Exchange, Inc. (``Bats BZX'') and Bats EDGX Exchange,
Inc. (``Bats EDGX'' and, together with Bats BYX, Bats BZX, and Bats
EDGA, the ``Bats Exchanges'') by CBOE Holdings, Inc. (``CBOE
Holdings''). CBOE Holdings is also the parent of Chicago Board Options
Exchange, Incorporated (``CBOE'') and C2 Options Exchange, Incorporated
(``C2''). This filing proposes to amend and restate the bylaws (and
amend the rules, accordingly) and the certificate of incorporation of
the Exchange based on

the bylaws and certificates of incorporation of CBOE and C2.
    Specifically, the Exchange proposes to replace the certificate of
incorporation of Bats EDGA Exchange, Inc., (the ``current
Certificate'') in its entirety with the Second Amended and Restated
Certificate of Incorporation of Bats EDGA Exchange, Inc. (the
``proposed Certificate''). Additionally, the Exchange proposes to
replace the Sixth Amended and Restated Bylaws of Bats EDGA Exchange,
Inc. (the ``current Bylaws'') in its entirety with the Seventh Amended
and Restated Bylaws of Bats EDGA Exchange, Inc. (the ``proposed
Bylaws''). The Exchange believes that it is important for each of CBOE
Holdings' six U.S. securities exchanges to have a consistent, uniform
approach to corporate governance. Therefore, to simplify and unify the
governance and corporate practices of these six exchanges, the Exchange
proposes to revise the current Certificate and current Bylaws to
conform them to the certificates of incorporation and bylaws of the
CBOE and C2 exchanges (i.e., the Third Amended and Restated Certificate
of Incorporation of Chicago Board Options Exchange, Incorporated and
the Fourth Amended and Restated Certificate of C2 Options Exchange,
Incorporated (collectively referred to herein as the ``CBOE
Certificate'') and the Eighth Amended and Restated Bylaws of Chicago
Board Options Exchange, Incorporated and the Eighth Amended and
Restated Bylaws of C2 Options Exchange, Incorporated (collectively
referred to herein as the ``CBOE Bylaws'')). The proposed Certificate
and proposed Bylaws reflect the expectation that the Exchange will be
operated with governance structures similar to those of CBOE and C2.
Accordingly, the Exchange proposes to adopt corporate documents that
set forth a substantially similar corporate governance framework and
related processes as those contained in the CBOE Certificate and CBOE
Bylaws. The Exchange believes the proposed changes to the current
Certificate and current Bylaws are consistent with the requirements of
the Securities Exchange Act of 1934, as amended (the ``Act'').
(a) Changes to the Certificate
    In connection with the Transaction, the Exchange proposes to amend
and restate the current Certificate to conform to the certificates of
incorporation of CBOE and C2. The proposed Certificate is set forth in
Exhibit 5B. Specifically, the Exchange proposes to make the following
substantive amendments to the current Certificate.
     Adopt an introductory section.
     Amend Article Third to provide further details as to the
nature of the business of the Exchange. Specifically, the proposed
Certificate will further specify that the nature of the Exchange is (i)
to conduct and carry on the function of an ``exchange'' within the
meaning of that term in the Act and (ii) to provide a securities market
place with high standards of honor and integrity among its Exchange
Members and other persons holding rights to access the Exchange's
facilities and to promote and maintain just and equitable principles of
trade and business.
     Article Fourth of the proposed Certificate specifies that
Direct Edge LLC will be the sole owner of the Common Stock and that any
sale, transfer or assignment by Direct Edge LLC of any shares of Common
Stock will be subject to prior approval by the SEC pursuant to a rule
filing. The Exchange notes that Article IV, Section 7 of the current
Bylaws similarly precludes the stockholder from transferring or
assigning, in whole or in part, its ownership interest(s) in the
Exchange.
     Article Fifth of the proposed Certificate is the same as
Article Fifth of the CBOE Certificate. Specifically, Article Fifth,
subparagraph (a) provides that the governing body of the Exchange shall
be its Board. Article Fifth, subparagraph (b) provides that the Board
shall consist of not less than five (5) Directors and subparagraph (c)
includes language regarding the nomination of directors, which
information is substantially similar as is provided in the CBOE Bylaws
and the proposed Bylaws.\3\ Article Fifth, subparagraph (d) of the
proposed Certificate provides that in discharging his or her
responsibilities as a member of the Board, each Director shall take
into consideration the effect that his or her actions would have on the
ability of the Exchange to carry out the Exchange's responsibilities
under the Act and on the ability of the Exchange: To engage in conduct
that fosters and does not interfere with the Exchange's ability 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 mechanisms of a
free and open market and a national market system; and, in general, to
protect investors and the public interest. In discharging his or her
responsibilities as a member of the Board or as an officer or employee
of the Exchange, each such Director, officer or employee shall comply
with the federal securities laws and the rules and regulations
thereunder and shall cooperate with the Commission, and the Exchange
pursuant to its regulatory authority. The Exchange notes that similar
language is included in the current Bylaws.\4\
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    \3\ See Article III of the CBOE Bylaws and proposed Bylaws.
    \4\ See Article III, Section 1(d) and Section 1(e) of the
current Bylaws.
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     Article Sixth of the proposed Certificate governs the
indemnification of Directors of the Board. The Exchange notes that its
indemnification provision is currently contained in Article VIII of the
current Bylaws. In order to conform governance documents across all
CBOE Holdings' exchanges and conform indemnification practices, the
Exchange is eliminating its indemnification in the bylaws and adopting
the same indemnification language that is currently contained in
Article Sixth of the CBOE Certificate.
     Article Seventh of the proposed Certificate is the same as
Article Seventh of the CBOE Certificate and provides that the Exchange
reserves the right to amend, change or repeal any provision of the
certificate. It also provides that before any amendment or repeal of
any provision of the certificate shall be effective, the changes must
be submitted to the Board, and if such amendment or repeal must be
filed with or filed with and approved by the Commission, it won't be
effective until filed with or filed with and approved by the
Commission.
     Article Eighth of the proposed Certificate is the same as
Article Eighth of the CBOE Certificate. Proposed Article Eighth
provides that a Director of the Exchange shall not be liable to the
Exchange or its stockholders for monetary damages for breach of
fiduciary duty as a Director, except to the extent such exemption from
liability or limitation is not permitted under Delaware Corporate law.
     Article Ninth of the proposed Certificate is the same as
Article Ninth of the CBOE Certificate. Specifically it provides that
unless and except to the extent that the Exchange's bylaws require,
election of Directors of the Exchange need not be by written ballot.
     Article Tenth of the proposed Certificate is the same as
Article Tenth of the CBOE Certificate and provides that in furtherance
and not in limitation of the powers conferred by the laws of the State
of Delaware, the Board is expressly authorized to make, alter and

repeal the Exchange's bylaws, which is already provided for in both the
current Bylaws and proposed Bylaws.\5\
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    \5\ See Article IX, Section 1 of the current Bylaws and Article
IX, Section 9.1 of the proposed Bylaws.
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     Article Eleventh of the proposed Certificate is the same
as Article Eleventh of the CBOE Certificate and is similar to Article
XI, Section 3 of the current Bylaws. Particularly, Article Eleventh
provides that confidential information pertaining to the self-
regulatory function of the Exchange (including but not limited to
disciplinary matters, trading data, trading practices and audit
information) contained in the books and records of the Exchange shall:
(i) Not be made available to any persons other than to those officers,
directors, employees and agents of the Exchange that have a reasonable
need to know the contents thereof; (ii) be retained in confidence by
the Exchange and the officers, directors, employees and agents of the
Exchange; and (iii) not be used for any commercial purposes.
Additionally, Article Eleventh of the proposed Certificate further
provides that nothing in Article Eleventh shall be interpreted as to
limit or impede the rights of the Commission to access and examine such
confidential information pursuant to the federal securities laws and
the rules and regulations thereunder, or to limit or impede the ability
of any officers, directors, employees or agents of the Exchange to
disclose such confidential information to the Commission.
(b) Substantive Changes to the Bylaws
    In connection with the Transaction, the Exchange also proposes to
amend and restate the current Bylaws to conform to the Bylaws of CBOE
and C2. The proposed Bylaws is set forth in Exhibit 5D. Specifically,
the Exchange proposes to make the following substantive amendments to
the current Bylaws:
Definitions
    The Exchange first notes that Section 1.1 of the proposed Bylaws,
titled ``Definitions,'' contains key definitions of terms used in the
proposed Bylaws, and are based on the defined terms used in Section 1.1
of the CBOE Bylaws. The Exchange notes that certain differences in
terminology in the proposed Bylaws and CBOE Bylaws will exist (e.g.,
use of the term ``Exchange Member'' instead of ``Trading Permit
Holder''). The Exchange proposes to eliminate from the current Bylaws
certain definitions that would be obsolete under the proposed Bylaws
(e.g., references to ``Member Representative Directors'' and ``Member
Nominating Committee'') and also proposes to move certain defined terms
located in the current Bylaws to the EDGA Rules (i.e., ``Industry
member'' and ``Member Representative member'').\6\ Additionally, the
Exchange proposes to define certain terms in the current Bylaws in
places other than Section 1.1, so as to match the CBOE Bylaws (e.g.,
the definition of ``Industry Director'' is being relocated to Article
III, Section 3.1 of the proposed Bylaws and the definition of ``Record
Date'' is being relocated to Article II, Section 2.7 of the proposed
Bylaws).\7\
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    \6\ See Proposed EDGA Rules, Rule 8.6. The Exchange notes that
the definition of a Member Representative member is being revised to
eliminate the reference to a Stockholder Exchange Member. Currently,
a Stockholder Exchange Member means an Exchange Member that also
maintains, directly or indirectly, an ownership interest in the
Company. The exchange notes that the sole stockholder of EDGA is
Direct Edge LLC, which is a wholly owned subsidiary of CBOE Holdings
and is not an Exchange member, and as such, the concept of a
Stockholder Exchange Member need not be referenced.
    \7\ The Exchange notes a few differences between the definitions
of Industry Director and Record Date in the current Bylaws and the
proposed Bylaws. Specifically, the definition of ``Industry
Director'' in Article I, subparagraph (o) of the current Bylaws
contains references to specific percentages in order to determine
whether a Director qualifies as an Industry Director, whereas the
definition of ``Industry Director'' in Article III, Section 3.1, of
the proposed Bylaws uses the term ``material portion'' in making
those same determinations. The definition of ``Record Date'' in
Article I, subparagraph (z) of the current Bylaws means a date at
least thirty-five (35) days before the date of the annual meeting of
stockholders, whereas Article II, Section 2.7 of the proposed Bylaws
provides that the Record Date shall be at least 10 days before the
date of the annual meeting of stockholders and not more than 60 days
before the annual meeting.
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Office and Agent
    The Exchange notes that the information in Article II (Office and
Agent) of the current Bylaws is not included in the proposed Bylaws.
The Exchange notes that the language contained in Section 2 and 3 of
Article II is already located in the current Certificate and will
continue to be located in the proposed Certificate.\8\ The Exchange
does not believe the information contained in Section 1 of Article II
is necessary to include in the proposed Bylaws and notes that the CBOE
Bylaws do not contain information relating to the principal business
office.
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    \8\ See Article Second of the current and proposed Certificates.
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Nomination and Election Process
    Article III of the proposed Bylaws, titled ``Board of Directors'',
mirrors the language in Article III of the CBOE Bylaws and contains key
provisions regarding the processes for nominating and electing
Representative Directors.
General Nomination and Election
    Under the Exchange's current director nomination and election
process, the Nominating Committee (which is not a Board committee, but
rather is composed of Exchange member representatives) \9\ nominates
Directors for each Director position standing for election for that
year. Additionally, for Member Representative Director positions,\10\
the Nominating Committee must nominate the Directors that have been
approved and submitted by the Member Nominating Committee (which is
also not a Board committee, but rather is composed of Member
Representative members).\11\ Additionally, pursuant to Article III,
Section 3(b) of the current Bylaws, the Exchange Directors are divided
into three classes, designated as Class I, Class II and Class III.
Directors other than the Chief Executive Officer of the Exchange
(``CEO'') serve staggered three-year terms. The Exchange proposes to
adopt a nomination and election process identical to CBOE and C2 as set
forth in Article III of the proposed Bylaws. As such, the tiered class
system will be eliminated, Directors will serve one-year terms ending
on the annual meeting following the meeting at which Directors were
elected or at such time as their successors are elected or appointed
and the newly established Nominating and Governance Committee will be
responsible for nominating each Director.\12\
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    \9\ See Current Bylaws, Article III, Section 4 (``Nomination and
Election'') and Article VI, Section 2 (``Nominating Committee'').
    \10\ See Current Bylaws, Article I, (s), which defines a
``Member Representative Director''. A Member Representative Director
must be an officer, director, employee, or agent of an Exchange
Member that is not a Stockholder Exchange Member.
    \11\ See Current Bylaws Article I, subparagraph (t) (``Member
Representative member''). See also, Article III, Section [sic]
(``Nomination and Election'') and Article VI, Section 3 (``Member
Nominating Committee'') of the current Bylaws.
    \12\ See Article III, Section 3.1 and Article IV, Section 4.3 of
the proposed Bylaws.
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Nomination and Election of Representative Directors
    Currently, pursuant to Article III, Section 4(b) of the current
Bylaws, for Member Representative Directors, the Member Nominating
Committee consults with the Nominating Committee, the Chairman of the
Board and the CEO, and also solicits comments from Exchange Members for
purposes of approving and submitting the names of candidates for
election as a Member Representative Director. The initial nominees for
Member Representative Directors must be

reported to the Nominating Committee and Secretary no later than sixty
(60) days prior to the annual or special stockholders' meeting, at
which point the Secretary will promptly notify Exchange Members.
Exchange Members may then identify other candidates by delivering to
the Secretary, at least thirty-five (35) days before the annual or
special stockholders' meeting, a written petition, identifying the
alternative candidate and signed by Executive Representatives \13\ of
10% or more of Exchange Members. No Exchange Member, together with its
affiliates, may account for more than fifty percent (50%) of the
signatures endorsing a particular candidate. If no valid petitions from
Exchange Members are received by the Record Date, the initial nominees
approved and submitted by the Member Nominating Committee shall be
nominated as Member Representative Directors by the Nominating
Committee. If one or more valid petitions are received by the Record
Date, the Secretary shall include such additional nominees, along with
the initial nominees nominated by the Member Nominating Committee, on a
list of nominees (the ``List of Candidates'') that is sent to all
Exchange Members, accompanied by a notice regarding the time and date
of an election to be held at least twenty (20) days prior to the annual
or special stockholders' meeting. Each Exchange Member has the right to
cast one (1) vote for each available Member Representative Director
nomination (the vote must be cast for a person on the List of
Candidates and no Exchange Member, together with its affiliates, may
account for more than twenty percent (20%) of the votes cast for a
candidate). The persons on the List of Candidates who receive the most
votes shall be selected as the nominees for the Member Representative
Director positions.
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    \13\ The term ``Executive Representative'' as defined in the
current Bylaws, Article I, means the person identified to the
Company by an Exchange Member as the individual authorized to
represent, vote, and act on behalf of the Exchange Member. An
Executive Representative of an Exchange Member or a substitute shall
be a member of senior management of the Exchange Member.
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    For purposes of harmonizing the governance structure and process
across all of CBOE Holdings' U.S. securities exchanges, the Exchange
proposes to eliminate the Nominating Committee and Member Nominating
Committee and adopt a nomination and election process substantially
similar to CBOE and C2 for Member Representative Directors (to be
renamed ``Representative Directors'').\14\ The Exchange notes that
unlike the current Bylaws, the proposed Bylaws will not require
Representative Directors to be an officer, director, employee, or agent
of an Exchange Member that is not a Stockholder Exchange Member, as
neither CBOE nor C2 maintain such a requirement. The new process will
provide that the ``Representative Director Nominating Body'' shall be
responsible for nominating Representative Directors. The Representative
Director Nominating Body (``Nominating Body'') is either (i) the
Industry-Director Subcommittee of the Nominating and Governance
Committee if there are at least two (2) Industry Directors on the
Nominating and Governance Committee, or (ii) if the Nominating and
Governance Committee has less than two (2) Industry Directors, then the
Nominating Body shall mean the Exchange Member Subcommittee of the
Advisory Board.\15\ The Nominating and Governance Committee shall be
bound to accept and nominate the Representative Director nominees
recommended by the 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. Any person nominated by the
Nominating Body and any petition candidate must satisfy the
compositional requirements determined by the Board, pursuant to a
resolution adopted by the Board, designating the number of
Representative Directors that are Non-Industry Directors and Industry
Directors (if any). Not earlier than December 1 and not later than
January 15th (or the first business day thereafter if January 15th is
not a business day), the Nominating Body shall issue a circular to
Exchange Members identifying the Representative Director nominees. As
is the case under the current Bylaws, Exchange Members may nominate
alternative candidates for election to the Representative Director
positions to be elected in a given year by submitting a petition signed
by individuals representing not less than ten percent (10%) of the
Exchange Members at that time. Petitions must be filed with the
Secretary no later than 5:00 p.m. (Chicago time) on the 10th business
day following the issuance of the circular to the Exchange Members
identifying the Representative Director nominees (the ``Petition
Deadline''). The names of all Representative Director nominees
recommended by the Nominating Body and those selected pursuant to a
valid and timely petition shall, immediately following their selection,
be given to the Secretary who shall promptly issue a circular to all of
the Exchange Members identifying all such Representative Director
candidates.
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    \14\ Article III, Section 3.1. of the proposed Bylaws requires
that at all times, at least 20% of Directors serving on the Board
shall be Representative Directors, which is the same percentage
required under the current Bylaws (see Article III, Section 2(b)(ii)
of the current Bylaws). Article III, Section 3.2 of the proposed
Bylaws further clarifies that if 20% of the Directors then serving
on the Board is not a whole number, the number of required
Representative Directors shall be rounded up to the next whole
number.
    \15\ The Exchange notes that if there are less than two (2)
Industry Directors on the Nominating and Governance Committee, it
would institute an Advisory Board, if not already established.
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    If one or more valid petitions are received, the Secretary shall
issue a circular to all of the Exchange Members identifying those
individuals nominated for Representative Director by the Nominating
Body and those individuals nominated for Representative Director
through the petition process, as well as of the time and date of a run-
off election to determine which individuals will be nominated as
Representative Director(s) by the Nominating and Governance Committee
(the ``Run-off Election''). The Run-off Election will be held not more
than forty-five (45) days after the Petition Deadline. In any Run-off
Election, each Exchange Member shall have one (1) vote for each
Representative Director position to be filled that year; provided,
however, that no Exchange Member, either alone or together with its
affiliates, may account for more than twenty percent (20%) of the votes
cast for a candidate.\16\ The Secretary shall issue a circular to all
of the Exchange Members setting forth the results of the Run-off
Election. The number of individual Representative Director nominees
equal to the number of Representative Director positions to be filled
that year receiving the largest number of votes in the Run-off Election
will be the persons approved by the Exchange Members to be nominated as
the Representative Director(s) by the Nominating and Governance
Committee for that year. The Exchange believes that, under the proposed
Board

structure, the Representative Directors serve the same function as the
Member Representative Directors in that both directorships give
Exchange members a voice in the Exchange's use of self-regulatory
authority.
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    \16\ Article III, Section 3.2 of the CBOE Bylaws provides that
in any Run-off Election, a holder of a Trading Permit shall have one
vote with respect to each Trading Permit held by such Trading Permit
Holder for each Representative Director position to be filled. The
Exchange notes that because no ``Trading Permits'' or similar
concept exist on the Exchange, it is deviating from this practice
and providing instead that each Exchange Member shall have one (1)
vote for each Representative Director position to be filled, which
the Exchange does not believe is a significant change. The Exchange
also notes that other Exchanges have similar practices. See e.g.,
Amended and Restated By-Laws of Miami International Securities
Exchange, LLC, Article II, Section 2.4(f).
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Vacancies
    Article III, Section 6 of the current Bylaws provides that during a
vacancy of any Director other than a Member Representative Director,
the Nominating Committee shall nominate an individual Director and the
stockholders of EDGA shall elect the new Director.\17\ In the event of
a vacancy of a Member Representative Director, the Member Nominating
Committee shall either (i) recommend an individual to the stockholders
to be elected to fill such vacancy or (ii) provide a list of
recommended individuals to the stockholders from which the stockholders
shall elect the individual to fill such vacancy. The current Bylaws
provide that Directors elected to fill a vacancy are to hold office
until the expiration of the remaining term.
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    \17\ The sole stockholder of EDGA is Direct Edge LLC, a wholly
owned subsidiary of CBOE Holdings.
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    The Exchange proposes to adopt the same process to fill vacancies
as CBOE and C2. Specifically, Article III, Section 3.5 of the proposed
Bylaws, which is substantially similar to Article III, Section 3.5 of
the CBOE Bylaws, will provide that a vacancy on the Board may be filled
by a vote of majority of the Directors then in office, or by the sole
remaining Director, so long as the elected Director qualifies for the
position. Additionally, for vacancies of Representative Directors, the
Nominating Body will recommend an individual to be elected, or provide
a list of recommended individuals, and the position shall be filled by
the vote of a majority of the Directors then in office. Under the
proposed Bylaws, Directors elected to fill a vacancy will serve until
the next annual meeting of stockholders.
Removals and Resignation
    Article III, Section 7 of the current Bylaws provides that any
Director may be removed with or without cause by a majority vote of
stockholders and may be removed by the Board, provided however, that
any Member Representative Director may only be removed for cause, which
includes such Director being subject to a Statutory Disqualification.
Additionally, a Director shall be immediately removed upon a
determination by the Board, by a majority vote of remaining Directors
that (a) the Director no longer satisfies the classification for which
the Director was elected and (b) the Director's continued service would
violate the compositional requirements of the Board. Article III,
Section 7 of the current Bylaws also provides that any Director may
resign at any time upon notice of resignation to the Chairman of the
Board, the President or Secretary. Resignation shall take effect at the
time specified, or if no time is specified, upon receipt of the notice.
    Under Article III, Section 3.4 of the proposed Bylaws, which is the
same as Article III, Section 3.4, of the CBOE Bylaws, a Director who
fails to maintain the applicable Industry or Non-Industry
qualifications required under the proposed Bylaws, of which the Board
shall be the sole judge, will cease being a Director. The Exchange
notes that while the current Bylaws do not address the requalification
of a Director, Section 3.4 of the proposed Bylaws permits a Director
that fails to maintain the applicable qualifications to requalify
within the later of forty-five (45) days from the date when the Board
determines the Director is unqualified or until the next regular Board
meeting following the date when the Board makes such determination. The
Director shall be deemed not to hold office (i.e., the Director's seat
is considered vacant) following the date when the Board determines the
Director is unqualified. Further, the Board shall be the sole judge of
whether the Director has requalified. If a Director is determined to
have requalified, the Board, in its sole discretion, may fill an
existing vacancy in the Board or may increase the size of the Board, as
necessary, to appoint such Director to the Board; provided, however,
that the Board shall be under no obligation to return such Director to
the Board. Similar to the current Bylaws, Section 3.4 of the proposed
Bylaws provides that Representative Directors may only be removed for
cause. In addition to specifying that cause includes being subject to a
Statutory Disqualification, the proposed Bylaws further lists
additional examples of cause in Section 3.4 (e.g., breach of a
Representative Director's duty of loyalty to the Exchange or its
stockholders and transactions from which a Representative Director
derived an improper personal benefit). Lastly, the Exchange notes that
under the proposed Bylaws, resignation must be written and must be
given to either the Chairman of the Board or the Secretary.
Board Composition
    Pursuant to Article III, Section 2 of the current Bylaws, the Board
must consist of four (4) or more Directors, and consist at all times of
one (1) Director who is the CEO and a sufficient number of Industry,
Non-Industry and Member Representative Directors to ensure that the
number of Non-Industry Directors, including at least on Independent
Director, shall equal or exceed the sum of Industry and Member
Representative Directors. Additionally, the number of Member
Representative Directors must be at least twenty (20) percent of the
Board. The Exchange proposes to replace the Board composition and
structure with that of CBOE and C2. As is the case with CBOE and C2,
pursuant to Article III, Section 3.1, of the proposed Bylaws, the Board
must consist of at least five (5) directors (which is the minimum
number of Directors required for the Nominating and Governance
Committee), instead of 4 as required by the current Bylaws.
Additionally, the following would apply to the new Board structure:
     The number of Non-Industry Directors, Industry Directors
and the number of Representative Directors that are Non-Industry
Directors and Industry Directors (if any) will be determined by the
Board pursuant to resolution adopted by the Board.\18\
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    \18\ See Proposed Bylaws and CBOE Bylaws, Article III, Section
3.1.
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     The proposed Bylaws provide that the number of Non-
Industry Directors cannot be less than the number of Industry
Directors, whereas the current Bylaws, as noted above, provide that the
number of Non-Industry Directors, including at least on Independent
Director, shall equal or exceed the sum of Industry and Member
Representative Directors.\19\ Unlike the current Bylaws, the proposed
Bylaws provide that the CEO is excluded from the calculation of
Industry Directors, as is the practice under CBOE Bylaws.\20\
Additionally, the Exchange notes that the CBOE Bylaws do not contain
the term or concept of ``Independent Directors'' and in order to
conform the proposed Bylaws to the CBOE Bylaws, the proposed Bylaws
also do not reference ``Independent Directors'' with respect to
composition.
---------------------------------------------------------------------------

    \19\ See Current Bylaws, Article III, Section 2.
    \20\ Id.
---------------------------------------------------------------------------

     The Board or the Nominating and Governance Committee will
make all materiality determinations regarding who qualifies as an
Industry Director and Non-Industry Director.\21\
---------------------------------------------------------------------------

    \21\ Id.
---------------------------------------------------------------------------

     Unlike the current Bylaws which provide that the CEO shall
be the Chairman of the Board,\22\ the proposed Bylaws, provide that the
Chairman will be appointed by the Board and further

provides that the Board may designate an Acting Chairman in the event
the Chairman is absent or fails to act.\23\
---------------------------------------------------------------------------

    \22\ See Current Bylaws, Article III, Section 5.
    \23\ See Proposed Bylaws and CBOE Bylaws, Article III, Sections
3.6 and 3.8.
---------------------------------------------------------------------------

     Unlike the current Bylaws which provide that a Lead
Director must be designated by the Board among the Board's Independent
Directors,\24\ the proposed Bylaws provide that the Board may, but does
not have to, appoint a Lead Director, who if appointed, must be a Non-
Industry Director, which is the same practice under CBOE's Bylaws.\25\
---------------------------------------------------------------------------

    \24\ See Current Bylaws, Article III, Section 5.
    \25\ See Proposed Bylaws and CBOE Bylaws, Article III, Section
3.7.
---------------------------------------------------------------------------

     The number of Representative Directors must be at least
twenty (20) percent of the Board,\26\ which is the same requirement
under the current Bylaws as noted above.
---------------------------------------------------------------------------

    \26\ See Proposed Bylaws and CBOE Bylaws, Article III, Section
3.2.
---------------------------------------------------------------------------

Meetings
Annual Meeting of the Stockholders
    Article IV, Section 1 of the current Bylaws provides that the
annual meeting of the stockholders shall be held at such place and time
as determined by the Board. The Exchange notes that Article II, Section
2.2 of the proposed Bylaws is being amended to conform to Article II,
Section 2.2 of the CBOE Bylaws, which provides as a default that if
required by applicable law, an annual meeting of stockholders shall be
held on the third Tuesday in May of each year or such other date as may
be fixed by the Board, at such time as may be designated by the
Secretary prior to the giving of notice of the meeting. Section 2.2 of
the proposed Bylaws also provides that in no event shall the annual
meeting be held prior to the completion of the process for the
nomination of Representative Directors. The proposed Bylaws also
provide in Article II, Section 2.1 that in addition to the Board, the
Chairman (or CEO if there is no Chairman) may designate the location of
the annual meeting. The Exchange notes that it is not including the
information contained in Article IV, Section 3 of the current Bylaws.
Specifically, Section 3 provides that the Secretary of the Exchange (or
designee), shall prepare at least ten (10) days before every meeting of
stockholders, a complete list of stockholder entitled to vote at the
meeting. The Exchange does not believe this provision is necessary
given that EDGA's sole stockholder is Direct Edge LLC, a wholly owned
subsidiary of CBOE Holdings (and also notes that neither CBOE nor C2
follow this practice).
Special Meetings of the Stockholders
    Article IV, Section 2 of the current Bylaws provides that special
meetings of the stockholders may be called by the Chairman, the Board
or the President, and shall be called by the Secretary at the request
in writing of stockholders owning not less than a majority of the then
issued and outstanding capital stock of the Exchange entitled to vote.
In order to streamline the rules under which special meetings can be
called, the Exchange proposes to adopt the same special meeting
provision as Article II, Section 2.3 of the CBOE Bylaws. Particularly,
under Article II, Section 2.3 of the proposed Bylaws, special meetings
of stockholders may only be called by the Chairman or by a majority of
the Board. The CBOE Bylaws do not include the ability of stockholders
to request a special meeting. The Exchange does not believe this
provision is necessary given that EDGA's sole stockholder is Direct
Edge LLC, a wholly owned subsidiary of CBOE Holdings.
Quorum and Vote Required for Action at a Stockholder Meeting
    Article IV, Section 4 of the current Bylaws provides, among other
things, that the holders of a majority of the capital stock issued and
outstanding and entitled to vote, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders.
The provision also provides that if there is no quorum at any meeting
of the stockholders, the stockholders, present in person or represented
by proxy, shall have power to adjourn the meeting until a quorum is
present or represented. Additionally, if an adjournment of a meeting of
the stockholders is for more than thirty (30) days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder of
record entitled to vote at the meeting. Additionally, Article IV,
Section 4 provides that when a quorum is present at any meeting, the
vote of the holders of a majority of the capital stock having voting
power present in person or represented by proxy shall decide any
question brought before such meeting, unless the question is one upon
which by express provision of statute or of the Certificate of
Incorporation, a different vote is required, in which case such express
provision shall govern and control the decision of such question.
    The Exchange proposes to adopt Article II, Sections 2.5 and 2.6 of
the proposed Bylaws which are the same as Article II, Sections 2.5 and
2.6 of the CBOE Bylaws and similar to Article IV, Section 4 of the
current Bylaws. The Exchange notes that unlike the current Bylaws,
Article II, Section 2.5 of the proposed Bylaws and CBOE Bylaws do not
require notice of an adjourned meeting to be given to each stockholder
of record entitled to vote at the meeting if an adjournment is for more
than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting. The Exchange does not believe this
requirement is necessary given that EDGA's sole stockholder is Direct
Edge LLC, a wholly owned subsidiary of CBOE Holdings. Additionally, in
order to conform Article II, Section 2.6 of the proposed Bylaws to the
CBOE Bylaws, the Exchange also proposes to explicitly provide that a
plurality of votes properly cast shall elect the directors,
notwithstanding the language in Article II, 2.6 that provides that when
a quorum is present, a majority of the votes properly cast will decide
any question brought before a meeting unless a different vote is
required by express provision of statute or the Certificate of
Incorporation.
Regular Meetings of the Board
    Article III, Sections 8 and 9 of the current Bylaws provide that,
with or without notice, a resolution adopted by the Board determines
the time and place of the regular meeting and that if no designation as
to place is made, then the meeting will be held at the principal
business office of the Exchange. Article III, Section 3.10 of the
proposed Bylaws, which is the same as Article III, Section 3.10 of the
CBOE Bylaws, provides that regular meetings shall be held at such time
and place as is determined by the Chairman with notice provided to the
full Board.
Special Meetings of the Board
    Article III, Section 10 of the current Bylaws provides that special
meetings of the Board may be called on a minimum of two (2) days'
notice to each Director by the Chairman or the President and shall be
called by the Secretary upon written request of three (3) Directors.
Article III, Section 3.11 of the proposed Bylaws, which is the same as
Article III, Section 3.11 of the CBOE Bylaws, however, provides that
special meetings of the Board may be called by the Chairman and shall
be called by the Secretary upon written request of any four (4)
directors. Additionally, under the proposed Bylaws, the Secretary shall
give at least twenty-four (24) hours' notice of such meeting.

Board Quorum
    Article III, Section 12 of the current Bylaws provides that a
majority of the number of Directors then in office shall constitute a
quorum, whereas Article III, Section 3.9 of the proposed Bylaws, which
is the same as Article III, Section 3.9 of the CBOE Bylaws, provides
that two-thirds of the Directors then in office shall constitute a
quorum. Increasing the quorum requirement from a majority to two-thirds
will ensure that more Directors are present at meetings of the Board in
order to transact business for the Exchange.
Committees of the Board
    The current bylaws provide for the following standing committees of
the Board: A Compensation Committee, an Audit Committee, a Regulatory
Oversight Committee, and an Appeals Committee, each to be comprised of
at least three (3) members.\27\ The current Bylaws also provide that
the Exchange may establish an Executive Committee and a Finance
Committee.\28\ The Exchange proposes to modify the committees of the
Board to eliminate the Audit Committee, Appeals Committee, and
Compensation Committee, as well as eliminate the provision relating to
a Finance Committee. Additionally, the Exchange proposes to require a
mandatory Executive Committee and Nominating and Governance Committee,
as well as make several amendments to the Regulatory Oversight
Committee provision. The Exchange notes that CBOE and C2 have
eliminated their Audit and Compensation Committees and do not maintain
an Appeals Committee at the Board level. As previously noted, CBOE and
C2 do maintain a Board-level Nominating and Governance Committee, which
performs the functions of EDGA's current Nominating and Member
Nominating Committees, which the Exchange proposes to eliminate.
---------------------------------------------------------------------------

    \27\ See Current Bylaws, Article V, Section 1 and Section 2(a).
    \28\ See Current Bylaws, Article V, Sections 6(e) and (f),
respectively.
---------------------------------------------------------------------------

Elimination of Compensation Committee
    The Exchange seeks to eliminate the Compensation Committee because
it believes that the Compensation Committee's functions are duplicative
of the functions of the Compensation Committee of its parent company,
CBOE Holdings. Specifically, under its committee charter, the CBOE
Holdings Compensation Committee has authority to assist the CBOE
Holdings Board of Directors in carrying out its overall
responsibilities relating to executive compensation and also, among
other things, (i) recommending the compensation of the CBOE Holdings'
CEO and certain other executive officers and (ii) approving and
administering all cash and equity-based incentive compensation plans of
CBOE Holdings that affect employees of the CBOE Holdings and its
subsidiaries. Similarly, under its committee charter, the EDGA
Compensation Committee has authority to fix the compensation of EDGA's
CEO and to consider and recommend compensation policies, programs, and
practices to the EDGA CEO in connection with the EDGA CEO's fixing of
the salaries of other officers and agents of the Exchange.\29\ As such,
other than to the extent that the EDGA Compensation Committee
recommends the compensation of executive officers whose compensation is
not already determined by the CBOE Holdings Compensation Committee, its
activities are duplicative of the activities of the CBOE Holdings
Compensation Committee. Indeed, the Exchange notes that currently the
EDGA Compensation Committee only fixes the compensation amount of the
EDGA CEO. The Exchange notes that currently the Exchange's CEO is the
CEO (i.e., an executive officer) of CBOE Holdings, and as such, the
CBOE Holdings Compensation Committee already performs this function. To
the extent that compensation need be determined for any EDGA officer
who is not also a CBOE Holdings officer in the future, the Board or
senior management will perform such action without the use of a
compensation committee, as provided for in Article V, Section 5.11 of
the proposed Bylaws (which is identical to Article V, Section 5.11 of
the CBOE Bylaws). Thus, the responsibilities of the EDGA Compensation
Committee are duplicated by the responsibilities of the CBOE Holdings
Compensation Committee. The Exchange believes that its proposal to
eliminate its Compensation Committee is substantially similar to prior
actions taken by other securities exchanges with parent company
compensation committees to eliminate their exchange-level compensation
committees, including CBOE and C2.\30\
---------------------------------------------------------------------------

    \29\ The Exchange notes that the Regulatory Oversight Committee
(``ROC'') of the EDGA Board recommends to the Board compensation for
the Chief Regulatory Officer. The Exchange also notes that currently
not all executive officers of EDGA are required to have their
compensation determined by the Compensation Committee.
    \30\ See e.g., Securities Exchange Act Release No. 80523 (April
25, 2017), 82 FR 20399 (May 1, 2017) (SR-CBOE-2017-017) and
Securities Exchange Act Release No. 80522 (April 25, 2017), 82 FR
20409 (May 1, 2017) (SR-C2-2017-009). See also Securities Exchange
Act Release No. 60276 (July 9, 2009), 74 FR 34840 (July 17, 2009)
(SR-NASDAQ-2009-042) and Securities Exchange Act Release No. 62304
(June 16, 2010), 75 FR 36136 (June 24, 2010) (SR-NYSEArca-2010-31).
---------------------------------------------------------------------------

Elimination of Audit Committee
    The Exchange also proposes to eliminate its Audit Committee because
its functions are duplicative of the functions of the Audit Committee
of its parent company, CBOE Holdings. Under its committee charter, the
CBOE Holdings Audit Committee has broad authority to assist the CBOE
Holdings Board in fulfilling its oversight responsibilities in
assessing controls that mitigate the regulatory and operational risks
associated with operating the Exchange and assist the CBOE Holdings
Board of Directors in discharging its responsibilities relating to,
among other things, (i) the qualifications, engagement, and oversight
of CBOE Holdings' independent auditor, (ii) CBOE Holdings' financial
statements and disclosure matters, (iii) CBOE Holdings' internal audit
function and internal controls, and (iv) CBOE Holdings' oversight and
risk management, including compliance with legal and regulatory
requirements. Because CBOE Holdings' financial statements are prepared
on a consolidated basis that includes the financial results of CBOE
Holdings' subsidiaries, including EDGA, the CBOE Holdings Audit
Committee's purview necessarily includes EDGA. The Exchange notes that
unconsolidated financial statements of the Exchange will still be
prepared for each fiscal year in accordance with the requirements set
forth in its application for registration as a national securities
exchange. The CBOE Holdings Audit Committee is composed of at least
three (3) CBOE Holdings directors, all of whom must be independent
within the meaning given to that term in the CBOE Holdings Bylaws and
Corporate Governance Guidelines and Rule 10A-3 under the Act.\31\ All
CBOE Holdings Audit Committee members must be financially literate (or
become financially literate within a reasonable period of time after
appointment to the Committee), and at least one (1) member of the
Committee must be an ``audit committee financial expert'' as defined by
the Securities and Exchange Commission (``SEC''). By contrast, the EDGA
Audit Committee has a more limited role, focused on EDGA. Under its
charter, the primary functions of the EDGA Audit Committee are focused
on (i) EDGA's financial

statements and disclosure matters and (ii) EDGA's oversight and risk
management, including compliance with legal and regulatory
requirements, in each case, only to the extent required in connection
with EDGA's discharge of its obligations as a self-regulatory
organization. However, to the extent that the EDGA Audit Committee
reviews financial statements and disclosure matters, its activities are
duplicative of the activities of the CBOE Holdings Audit Committee,
which is also charged with review of financial statements and
disclosure matters. Similarly, the CBOE Holdings Audit Committee has
general responsibility for oversight and risk management, including
compliance with legal and regulatory requirements, for CBOE Holdings
and all of its subsidiaries, including EDGA. Thus, the responsibilities
of the EDGA Audit Committee are fully duplicated by the
responsibilities of the CBOE Holdings Audit Committee. The Exchange
believes that its proposal to eliminate its Audit Committee is
substantially similar to prior actions by other securities exchanges
with parent company audit committees to eliminate their exchange-level
audit committees, including CBOE and C2.\32\
---------------------------------------------------------------------------

    \31\ 17 CFR 240.10A-3.
    \32\ See, e.g., Securities Exchange Act Release No. 64127 (March
25, 2011), 76 FR 17974 (March 31, 2011) (SR-CBOE-2011-010) and
Securities Exchange Act Release No. 64128 (March 25, 2011), 76 FR
17973 (March 31, 2011) (SR-C2-2011-003). See also, Securities
Exchange Act Release No. 60276 (July 9, 2009), 74 FR 34840 (July 17,
2009) (SR-NASDAQ-2009-042).
---------------------------------------------------------------------------

Elimination of Appeals Committee
    The Exchange next proposes to eliminate the Appeals Committee.
Pursuant to Article V, Section 6(d) of the current Bylaws, the
Chairman, with the approval of the Board, shall appoint an Appeals
Committee. The Appeals Committee shall consist of one (1) Independent
Director, one (1) Industry Director, and one (1) Member Representative
Director and presides over all appeals related to disciplinary and
adverse action determinations in accordance with the Rules. The
Exchange notes that neither CBOE nor C2 maintain a Board-level Appeals
Committee. Rather, CBOE and C2 currently maintain an Exchange-level
Appeals Committee.\33\ The Exchange notes that although it is proposing
to eliminate the Appeals Committee as a specified Board-level committee
at this time, the Exchange will still have the ability to appoint
either a Board-level or exchange-level Appeals Committee pursuant to
its powers under Article IV, Section 4.1 of the proposed Bylaws.
Although, CBOE and C2 have a standing exchange-level Appeals Committee,
the Exchange prefers not to have to maintain and staff a standing
Appeals Committee, but rather provide its Board the flexibility to
determine whether to establish a Board-level or exchange-level Appeals
Committee, as needed or desired. The Exchange also notes that other
Exchanges similarly do not require standing Appeals Committees.\34\ The
elimination of the requirement in the bylaws to maintain a standing
Appeals Committee would provide consistency among the Bylaws for all of
CBOE Holdings' U.S. securities exchanges, while still providing the
Board the authority to appoint an Appeals Committee in the future as
needed.
---------------------------------------------------------------------------

    \33\ See e.g., CBOE Rule 2.1 and C2 Chapter 19, which
incorporates by reference CBOE Chapter XIX (Hearings and Review),
which references the Appeals Committee.
    \34\ For example, neither the Bylaws nor Rules of BOX Options
Exchange, LLC mandate an Appeals Committee. See Bylaws of Box
Options Exchange LLC and Rules of Box Options Exchange, LLC.
---------------------------------------------------------------------------

Elimination of Finance Committee
    Pursuant to Article V, Section 6(f) of the current Bylaws, the
Chairman, with the approval of the Board, may appoint a Finance
Committee. The Finance Committee shall advise the Board with respect to
the oversight of the financial operations and conditions of the
Exchange, including recommendations for the Exchange's annual operating
and capital budgets. The Exchange notes that it does not currently have
a Finance Committee and that, similarly, CBOE and C2 do not have an
exchange-level Finance Committee. As the Exchange currently does not
maintain, and has no current intention of establishing, an exchange-
level Finance Committee, it does not believe it is necessary to
maintain this provision. The Exchange notes that should it desire to
establish a Finance Committee in the future, it still maintains the
authority to do so under Article IV, Section 4.1 of the proposed
Bylaws.
Changes to the Regulatory Oversight Committee
    Article V, Section 6(c) of the current Bylaws relates to the
Regulatory Oversight Committee (``ROC''), which oversees the adequacy
and effectiveness of the Exchange's regulatory and self-regulatory
organization responsibilities. The Exchange proposes to adopt Article
IV, Section 4.4, which amends the ROC provision to conform to Article
IV, Section 4.4 of the CBOE Bylaws.\35\ First, the Exchange proposes to
specify that the ROC shall consist of at least three (3) directors, all
of whom are Non-Industry Directors who are appointed by the Board on
the recommendation of the Non-Industry Directors serving on the
Nominating and Governance Committee (including the designation of the
Chairman of the ROC). While the current Bylaws also require all ROC
members to be Non-Industry Directors, it does not specify a minimum
number of directors. The current Bylaws also provide that the Chairman
of the Board (instead of a Nominating and Governance Committee), with
approval of the Board, appoints the ROC members.
---------------------------------------------------------------------------

    \35\ The Exchange does not intend at this time to rename the ROC
the ``Regulatory Oversight and Compliance Committee'' (``ROCC''),
which is the name of the equivalent committee of CBOE and C2.
---------------------------------------------------------------------------

    Next, while the current Bylaws explicitly delineate some of the
ROC's responsibilities, the Exchange proposes to provide more broadly
that the ROC shall have the duties and may exercise such authority as
may be prescribed by resolution of the Board, the Bylaws or the Rules
of the Exchange. Particularly, Article V, Section 6(c) of the current
Bylaws provide that the ROC shall oversee the adequacy and
effectiveness of the Exchange's regulatory and self-regulatory
organization responsibilities, assess the Exchange's regulatory
performance, assist the Board and Board committees in reviewing the
regulatory plan and the overall effectiveness of Exchange's regulatory
functions and, in consultation with the CEO, establish the goals,
assess the performance, and fix the compensation of the Chief
Regulatory Officer (``CRO''). The Exchange notes that the ROC will
continue to have the foregoing duties and authority, with the exception
that the ROC will no longer consult the CEO with respect to
establishing the goals, assessing the performance and fixing
compensation of the CRO. The proposed change to eliminate the CEO's
involvement in establishing the goals, assessing the performance and
fixing compensation of the CRO is consistent with the Exchange's desire
to maintain the independence of the regulatory functions of the
Exchange. The Exchange notes that each of the abovementioned proposed
changes provide for the same language and appointment process used by
CBOE and C2 with respect to the ROC, which provides consistency among
the CBOE Holdings U.S. securities exchanges.\36\
---------------------------------------------------------------------------

    \36\ See CBOE Bylaws Article IV, Section 4.4.
---------------------------------------------------------------------------

Creation of a Mandatory Executive Committee
    Article V, Section 6(e) of the current Bylaws provides that the
Chairman, with approval of the Board, may appoint an Executive
Committee, which shall, to

the fullest extent permitted by Delaware and other applicable law, have
and be permitted to exercise all the powers and authority of the Board
in the management of the business and affairs of the Exchange between
meetings of the Board.\37\ The current Bylaws provide that the number
of Non-Industry Directors on the Executive Committee shall equal or
exceed the number of Industry Directors on the Executive Committee. In
addition, the percentage of Independent Directors on the Executive
Committee shall be at least as great as the percentage of Independent
Directors on the whole Board, and the percentage of Member
Representative Directors on the Executive Committee shall be at least
as great as the percentage of Member Representative Directors on the
whole Board.
---------------------------------------------------------------------------

    \37\ The Exchange does not presently have an Executive
Committee.
---------------------------------------------------------------------------

    Under the proposed Bylaws, the Exchange proposes to require that
the Exchange maintain an Executive Committee and delineates its
composition and functions in Article IV, Section 4.2 of the proposed
Bylaws. Similar to the current Bylaw provisions relating to the
Executive Committee, the proposed Executive Committee shall have and
may exercise all the powers and authority of the Board in the
management of the business and affairs of the Exchange. Unlike the
current Executive Committee provisions, however, the proposed Executive
Committee shall not have the power and authority of the Board to (i)
approve or adopt or recommend to the stockholders any action or matter
(other than the election or removal of Directors) expressly required by
Delaware law to be submitted to stockholders for approval, including
without limitation, amending the certificate of incorporation, adopting
an agreement of merger or consolidation, approving a sale, lease or
exchange of all or substantially all of the Exchange's property and
assets, or approval of a dissolution of the Exchange or revocation of a
dissolution, or (ii) adopt, alter, amend or repeal any bylaw of the
Exchange. Additionally, Section 4.2 of the proposed Bylaws provides
that the Executive Committee shall consist of the Chairman, the CEO (if
a Director), the Lead Director, if any, at least one (1) Representative
Director and such other number of Directors that the Board deems
appropriate, provided that in no event shall the number of Non-Industry
Directors constitute less than the number of Industry Directors serving
on the Executive Committee (excluding the CEO from the calculation of
Industry Directors for this purpose). The Directors (other than the
Chairman, CEO and Lead Director, if any) serving on the Executive
Committee shall be appointed by the Board on the recommendation of the
Nominating and Governance Committee of the Board. Directors serving on
the Executive Committee may be removed by the Board in accordance with
the bylaws. The Chairman of the Board shall be the Chairman of the
Executive Committee. Each member of the Executive Committee shall be a
voting member and shall serve for a term of one (1) year expiring at
the first regular meeting of Directors following the annual meeting of
stockholders each year or until their successors are appointed. The
Exchange notes that CBOE and C2 have an Executive Committee and that
the proposed composition requirements and functions are the same as
CBOE and C2.\38\
---------------------------------------------------------------------------

    \38\ See CBOE Bylaws, Article IV, Section 4.2.
---------------------------------------------------------------------------

Elimination of Nominating and Member Nominating Committees and Creation
of Nominating and Governance Committee
    The Exchange also proposes to eliminate the current Nominating and
Member Nominating Committees, and to prescribe that their duties be
performed by the new Nominating and Governance Committee of the Board
(as discussed below). The Nominating Committee is a non-Board committee
and is elected on an annual basis by vote of the Exchange's sole
stockholder, Direct Edge LLC \39\ The Nominating Committee is primarily
charged with nominating candidates for election to the Board at the
annual stockholder meeting and all other vacant or new Director
positions on the Board and ensuring, in making such nominations, that
candidates meet the compositional requirements set forth in the bylaws.
The Member Nominating Committee is also a non-Board committee and
elected on an annual basis by vote of the Exchange's sole stockholder,
Direct Edge LLC. \40\ Each Member Nominating Committee member must be a
Member Representative member (i.e., an officer, director, employee or
agent of an Exchange Member that is not a Stockholder Exchange
Member).\41\ The Member Nominating Committee is primarily charged with
nominating candidates for each Member Representative Director position
on the Board.
---------------------------------------------------------------------------

    \39\ See Article VI, Sections 1 and 2. A Nominating Committee
member may simultaneously serve on the Nominating Committee and the
Board, unless the Nominating Committee is nominating Director
candidates for the Director's class. The number of Non-Industry
members on the Nominating Committee shall equal or exceed the number
of Industry members on the Nominating Committee.
    \40\ See Article VI, Sections 1 and 3.
    \41\ See Article VI, Section 3.
---------------------------------------------------------------------------

    The Exchange proposes to adopt a Nominating and Governance
Committee which would have the same responsibilities currently
delegated to the CBOE and C2 Nominating and Governance Committees.
Specifically, the Exchange proposes to adopt Article IV, Section 4.3,
which is the same as Article IV, Section 4.3 of the CBOE Bylaws, which
would provide that the Nominating and Governance Committee shall
consist of at least five (5) directors and shall at all times have a
majority of Non-Industry Directors. Members of the committee would be
recommended by the Nominating and Governance Committee for approval by
the Board and shall not be subject to removal except by the Board. The
Chairman of the Nominating and Governance Committee shall be
recommended by the Nominating and Governance Committee for approval by
the Board. The Nominating and Governance Committee would be primarily
charged with the authority to nominate individuals for election as
Directors of the Exchange. The Nominating and Governance Committee
would also have such other duties and may exercise such other authority
as may be prescribed by resolution of the Board and the Nominating and
Governance Committee charter as adopted by resolution of the Board. If
the Nominating and Governance Committee has two (2) or more Industry
Directors, there shall be an Industry-Director Subcommittee consisting
of all of the Industry Directors then serving on the Nominating and
Governance Committee, which shall act as the Representative Director
Nominating Body (as previously discussed) if and to the extent required
by the proposed Bylaws. The Exchange believes that the duties and
functions of the eliminated Nominating and Member Nominating Committees
would continue to be performed and covered in the new corporate
governance structure under the proposed Bylaws.
Creation of an Advisory Board
    The Exchange proposes to adopt Article VI, Section 6.1, which
provides that the Board may establish an Advisory Board which shall
advise the Board and management regarding matters of interest to
Exchange Members. The Exchange believes the Advisory Board could
provide a vehicle for Exchange management to receive advice from the
perspective of Exchange Members and regarding matters that impact
Exchange Members. Under

Article VI, Section 6.1 of the proposed Bylaws, the Board would
determine the number of members of an Advisory Board, if established,
including at least two members who are Exchange Members or persons
associated with Exchange Members. Additionally, the CEO or his or her
designee would serve as the Chairman of an Advisory Board and the
Nominating and Governance Committee would recommend the members of an
Advisory Board for approval by the Board. There would also be an
Exchange Member Subcommittee of the Advisory Board consisting of all
members of the Advisory Board who are Exchange Members or persons
associated with Exchange Members, which shall act as the Representative
Director Nominating Body if and to the extent required by the proposed
Bylaws. An Advisory Board would be completely advisory in nature and
not be vested with any Exchange decision-making authority or other
authority to act on behalf of the Exchange. The Exchange notes that
CBOE and C2 currently maintain an Advisory Board, with the same
proposed compositional requirements and functions.\42\ The Exchange
also notes, however, that while for CBOE and C2 an Advisory Board is
mandatory, an Advisory Board for the Exchange would be permissive as
the Exchange desires flexibility to determine if an Advisory Board
should be established in the future. The Exchange notes that there is
no statutory requirement to maintain an Advisory Board or Advisory
Committee and indeed, other Exchanges, including EDGA itself, do not
require the establishment of an Advisory Board.\43\
---------------------------------------------------------------------------

    \42\ See Article VI, Section 6.1 of CBOE Bylaws.
    \43\ For example, BOX Options Exchange, LLC does not require an
advisory committee.
---------------------------------------------------------------------------

Officers, Agents and Employees
General
    Article VII, Section 1 of the current Bylaws provides that that an
individual may not hold office as both the President and Secretary,
whereas the CBOE Bylaws provide an individual may not hold office as
both the CEO and President and that the CEO and President may not hold
office as either the Secretary or Assistant Secretary.\44\ As these
requirements are similar, if not more restrictive under the CBOE
Bylaws, the Exchange proposes to include the same provisions in the
CBOE Bylaws in Article V, Section 5.1 of the proposed Bylaws.
---------------------------------------------------------------------------

    \44\ See Article V, Section 5.1 of CBOE Bylaws.
---------------------------------------------------------------------------

Resignation and Removal
    Article VII, Section 3 of the current Bylaws provides that any
officer may resign at any time upon notice of resignation to the
Chairman and CEO, the President or the Secretary. The Exchange proposes
to amend the provision relating to officer resignations to provide that
any officer may resign at any time upon delivering written notice to
the Exchange at its principal office, or to the CEO or Secretary.\45\
Article VII, Section 3 of the current Bylaws also provides that any
officer may be removed, with or without cause, by the Board. The
Exchange proposes to provide that, in addition to being removed by the
Board, an officer may be removed at any time by the CEO or President
(provided that the CEO can only be removed by the Board).\46\
Provisions relating to resignation and removal of officers in the
proposed Bylaws will be identical to the relevant provisions of the
CBOE Bylaws.\47\
---------------------------------------------------------------------------

    \45\ See Proposed Bylaws, Article V, Section 5.9.
    \46\ See Proposed Bylaws, Article V, Section 5.8.
    \47\ See Article V, Sections 5.8 and 5.9 of the CBOE Bylaws.
---------------------------------------------------------------------------

Compensation
    Article VII, Section 4 of the current Bylaws provides that the CEO,
after consultation of the Compensation Committee, shall fix the
salaries of officers of the Exchange and also states that the CEO's
compensation shall be fixed by the Compensation Committee. In order to
conform compensation practices to those of CBOE and C2, the Exchange
proposes to modify these provisions to provide that in lieu of the CEO,
the Board, unless otherwise delegated to a committee of the Board or to
members of senior management, may fix the salaries of officers of the
Exchange.\48\ Additionally, in conjunction with the proposed change to
eliminate the EDGA Compensation Committee, the Exchange proposes to
eliminate language providing that the CEO's compensation is fixed by
the Compensation Committee.
---------------------------------------------------------------------------

    \48\ See Proposed Bylaws, Article V, Section 5.11.
---------------------------------------------------------------------------

Chief Executive Officer and President
    Article VII, Section 6 of the current Bylaws pertains to the CEO.
The current Bylaws provide that the CEO shall be the Chairman of the
Board. CBOE and C2, however, do not require that the CEO be Chairman of
the Board. The Exchange desires similar flexibility in appointing its
Chairman and, therefore, this requirement is not carried over in the
proposed Bylaws.\49\ Instead, Article V, Section 5.1 of the proposed
Bylaws provides that the CEO shall be appointed by an affirmative vote
of the majority of the Board, and may but need not be, the Chairman of
the Board. The Exchange notes that to conform the language to the CBOE
Bylaws, Article V, Section 5.2 of the proposed Bylaws also states that
the CEO shall be the official representative of the Exchange in all
public matters and provides that the CEO shall not engage in another
business during his incumbency except with approval of the Board.
Additionally, the Exchange proposes not to carry over language in the
current Bylaws that provides that the CEO shall not participate in
executive sessions of the Board, as CBOE Bylaws do not contain a
similar restriction.
---------------------------------------------------------------------------

    \49\ The Exchange notes that currently the CEO of EDGA is also
Chairman of the Board.
---------------------------------------------------------------------------

    Article V, Section 5.3 of the proposed Bylaws proposes to provide
that the President shall be the chief operating officer of the
Exchange. The Exchange notes that the current Bylaws do not address
appointing a chief operating officer. Additionally, while Article VII,
Section 7 of the current Bylaws provides that the President shall have
all powers and duties usually incident to the office of the President,
except as specifically limited by a resolution of the Board, and shall
exercise such other powers and perform such other duties as may be
assigned to the President from time to time by the Board, Article V,
Section 5.3 of the proposed Bylaws further states that in the event
that the CEO does not act, the President shall perform the officer
duties of the CEO, which is consistent with the language in the CBOE
Bylaws.
Other Officers
    The Exchange notes the following modifications relating to officer
provisions in the proposed Bylaws, which are intended to conform the
proposed Bylaws to the CBOE Bylaws:
     Article V, Sections 5.1 and 5.4 of the proposed Bylaws,
which is identical to Article V, Sections 5.1 and 5.4 of the CBOE
Bylaws, will provide that the Chief Financial Officer (``CFO'') is
designated as an officer of the Exchange and that the Board and CEO may
assign the CFO powers and duties as they see fit. The Exchange notes
that the role of a CFO is not referenced in the current Bylaws.
     The proposed Bylaws eliminate the requirement in the
current Bylaws that the Chief Regulatory Officer (``CRO'') is a
designated officer of the Exchange.\50\ As noted above, the Exchange
desires to conform its Bylaws to the Bylaws of CBOE and the CBOE Bylaws
do not

reference the role of the CRO. The Exchange notes that notwithstanding
the proposed elimination of the CRO provision, there is no intention to
eliminate the role of the CRO.
---------------------------------------------------------------------------

    \50\ See Current Bylaws, Article VII, Section 9.
---------------------------------------------------------------------------

     Article VII, Section 10 of the current Bylaws requires the
Secretary to keep official records of Board meetings. The Exchange
proposes to add to Article V, Section 5.6 of the proposed Bylaws, which
is similar to the current Bylaws and based on Article V, Section 5.6 of
the CBOE Bylaws, which requires that in addition to all meetings of the
Board, the Secretary must keep official records of all meetings of
stockholders and of Exchange Members at which action is taken.
     Article V, Section 5.7 of the proposed Bylaws, which is
based on Article 5.7 of the CBOE Bylaws, would provide that the
Treasurer perform such duties and powers as the Board, the CEO or CFO
proscribes (whereas Article VII, Section 12 of the current Bylaws
provides that such duties and powers may be proscribed by the Board,
CEO or President).
     While the current Bylaws contain separate provisions
relating to an Assistant Secretary and an Assistant Treasurer, the
proposed Bylaws do not, as CBOE Bylaws similarly do not contain such
provisions.\51\
---------------------------------------------------------------------------

    \51\ See Article VII, Sections 11 and 13 of the current Bylaws.
---------------------------------------------------------------------------

Amendments
    Article IX, Section 1 of the current Bylaws provides that the
bylaws may be altered, amended, or repealed, or new bylaws adopted, (i)
by written consent of the stockholders of the Exchange or (ii) at any
meeting of the Board by resolution. The proposed Bylaws, however,
eliminate the ability of stockholders to act by written consent and
instead provides that in order for the stockholders of the Exchange to
alter, amend, repeal or adopt new bylaws, there must be an affirmative
vote of the stockholders present at any annual meeting at which a
quorum is present.\52\ Additionally, unlike the current Bylaws, the
Exchange proposes to explicitly provide that changes to the bylaws
shall not become effective until filed with or filed with and approved
by the SEC, to avoid confusion as to when proposed amendments to the
Bylaws can take effect.\53\ The proposed provisions are the same as the
corresponding provisions in the CBOE Bylaws.\54\
---------------------------------------------------------------------------

    \52\ See Proposed Bylaws, Article IX, Section 9.2.
    \53\ See Proposed Bylaws, Article IX, Section 9.3.
    \54\ See Article IX, Sections 9.2 and 9.3 of the CBOE Bylaws.
---------------------------------------------------------------------------

General Provisions
    The Exchange proposes to add Article VIII, Section 8.1 of the
proposed Bylaws, which is the same as Article VIII, Section 8.1 of the
CBOE Bylaws, that unless otherwise determined by the Board, the fiscal
year of the Exchange ends on the close of business December 31 each
year, as compared to Article XI, Section 1 of the current Bylaws, which
provides that the fiscal year of the Exchange shall be as determined
from time to time by the Board. Note that the Exchange's fiscal year
currently ends on the close of business December 31 each year.
    The Exchange also proposes to add Article VIII, Section 8.2 of the
proposed Bylaws, which is the same as Article VIII, Section 8.2 of the
CBOE Bylaws, which governs the execution of instruments such as checks,
drafts and bills of exchange and contracts and which is similar to
Article XI, Section 6 of the current Bylaws.
    Next, the Exchange proposes to adopt Article VIII, Section 8.4,
which provides that, except as the Board may otherwise designate, the
Chairman of the Board, CEO, CFO or Treasurer may waive notice of, and
act as, or appoint any person or persons to act as, proxy or attorney-
in-fact for the Exchange (with or without power of substitution) at,
any meeting of stockholders or shareholders of any other corporation or
organization, the securities of which may be held by the Exchange. The
proposed provision is the same as Article VIII, Section 8.4 of the CBOE
Bylaws and similar to Article XI, Section 7 of the current Bylaws,
which provides generally that the CEO has the power and authority to
act on behalf of the Company at any meeting of stockholders, partners
or equity holders of any other corporation or organization, the
securities of which may be held by the Exchange.
    The Exchange proposes to adopt Article VIII, Section 8.7, which
governs transactions with interested parties. Proposed Article VIII,
Section 8.7 is the same as Article VIII, Section 8.7 of the CBOE Bylaws
and substantially similar to language contained in Article III, Section
18 of the current Bylaws. Similarly, the Exchange proposes to adopt
Article VIII, Section 8.8 which governs severability and is the same as
Article VIII, Section 8.8 of CBOE Bylaws and substantially similar to
Article XI, Section 8 of the current Bylaws.
    The Exchange proposes to adopt Article VIII, Section 8.10 which
provides that the board may authorize any officer or agent of the
Corporation to enter into any contract, or execute and deliver any
instrument in the name of, or on behalf of the Corporation. The
proposed language is the same as the language in Article VIII, Section
8.10 of the CBOE Bylaws and similar to related language in Article XI,
Section 6 of the current Bylaws.
    The Exchange proposes to adopt Article VIII, Section 8.12, relating
to books and records and which is the same as Article VIII, Section
8.12 of CBOE Bylaws and which is similar to language contained in
Article XI, Section 3 of the current Bylaws.
New Bylaw Provisions
    The Exchange proposes to add provisions to the proposed Bylaws that
are not included in the current Bylaws in order to conform the
Exchange's bylaws to those of CBOE and C2 and provide consistency among
the CBOE Holdings' U.S. securities exchanges. Specifically, the
Exchange proposes to add the following to the proposed Bylaws:
     Article VII, which addresses notice requirements for any
notice required to be given by the bylaws or Rules, including Article
VII, Section 7.2, which provides whenever any notice to any stockholder
is required, such notice may be given by a form of electronic
transmission if the stockholder to whom such notice is given has
previously consented to the receipt of notice by electronic
transmission. The language mirrors the language set forth in Article
VII, Section 7.2 of the CBOE Bylaws.
     Article VIII, Section 8.3 which is identical to Article
VIII, Section 8.3 of the CBOE Bylaws, which provides that the corporate
seal, if any, shall be in such form as approved by the board or officer
of the Corporation.
     Article VIII, Section 8.5, which provides that a
certificate by the Secretary, or Assistant Secretary, if any, as to any
action taken by the stockholders, directors, a committee or any officer
or representative of the Exchange shall, as to all persons who rely on
the certificate in good faith, be conclusive evidence of such action.
This language is identical to the language contained in Article VIII,
Section 8.5 of the CBOE Bylaws.
     Article VIII, Section 8.6., which is identical to Article
VIII, Section 8.6 of the CBOE Bylaws, which provides all references to
the Certificate of Incorporation shall be deemed to refer to the
Certificate of Incorporation of the Corporation, as amended, altered or
restated and in effect from time to time.
     Article VIII, Section 8.11, which provides that the
Exchange may lend money or assist an employee of the Exchange when the
loan, guarantee or assistance may reasonably benefit the

Exchange. This language is identical to the language contained in
Article VIII, Section 8.11 of the CBOE Bylaws.
Eliminated Bylaw Provisions
    The Exchange notes that the following provisions in the current
Bylaws are not carried over in either the proposed Bylaws or proposed
Certificate in order to conform the Exchange's bylaws to those of CBOE
and C2 and provide consistency among the CBOE Holdings' U.S. securities
exchanges:
     Article III, Sections 13 and 17. Section 13 provides that
a director who is present at a Board or Board Committee meeting at
which action is taken is conclusively presumed to have assented to
action being taken unless his or her dissent or election to abstain is
entered into the minutes or filed. Section 17 provides that the Board
has the power to interpret the Bylaws and any interpretations made
shall be final and conclusive. The Exchange does not wish to include
these provisions in the proposed Bylaws as no equivalent provisions
exist in the CBOE Bylaws and the Exchange wishes to have uniformity
across the bylaws of the CBOE Holdings' exchanges.
     Article IX, Section 2, which relates to the Board's
authority to adopt emergency Bylaws to be operative during any
emergency resulting from, among other things, any nuclear or atomic
disaster or attack on the United States, any catastrophe, or other
emergency condition, as a result of which a quorum of the Board or a
committee cannot readily be convened for action. Similarly, Article IX,
Section 3, provides that the Board, or Board's designee, in the event
of extraordinary market conditions, has the authority to take certain
actions. The Exchange does not wish to include these provisions in the
proposed Bylaws as no equivalent provisions exist in the CBOE Bylaws
and the Exchange wishes to have uniformity across the bylaws of the
CBOE Holdings' exchanges.
     Article X, Section 2, which relates to disciplinary
proceedings and provides that the Board is authorized to establish
procedures relating to disciplinary proceedings involving Exchange
Members and their associated persons, as well as impose various
sanctions applicable to Exchange Members and persons associated with
Exchange Members. The Exchange does not wish to include this provision
in the proposed Bylaws as no equivalent provisions exist in the CBOE
Bylaws. Additionally, the Exchange notes that Article III, Section 3.3
of the proposed Bylaws grants the Board broad powers to adopt such
procedures and/or rules if necessary or desirable.\55\
---------------------------------------------------------------------------

    \55\ The Exchange notes that the language in proposed Article
III, Section 3.3 is similar to language provided for in Article X,
Section 1 of the current Bylaws.
---------------------------------------------------------------------------

     Article X, Section 3, which relates to membership
qualifications and provides, among other things, that the Board has
authority to adopt rules and regulations applicable to Exchange Members
and Exchange Member applicants, as well as establish specified and
appropriate standards with respect to the training, experience,
competence, financial responsibility, operational capability, and other
qualifications. The Exchange does not wish to include this provision in
the proposed Bylaws as no equivalent provisions exist in the CBOE
Bylaws. The Exchange again notes that Article III, Section 3.3 of the
proposed Bylaws grants the Board broad powers to adopt such rules and
regulations if necessary or desirable.
     Article X, Section 4, which relates to fees, provides that
the Board has authority to fix and charge fees, dues, assessments, and
other charges to be paid by Exchange Members and issuers and any other
persons using any facility or system that the Company operates or
controls; provided that such fees, dues, assessments, and other charges
shall be equitably allocated among Exchange Members and issuers and any
other persons using any facility or system that the Company operates or
controls. The Exchange does not wish to include this section of the
provision in the proposed Bylaws as no equivalent provisions exist in
the CBOE Bylaws. To the extent the Board wishes to adopt such fees and
dues, it has the authority pursuant to Article III, Section 3.3 of the
proposed Bylaws. The Exchange notes that with respect to the language
in Article X, Section 4 of the current Bylaws relating to the
prohibition of using revenues received from fees derived from its
regulatory function or penalties for non-regulatory purposes, similar
language exists within CBOE Rules, particularly, CBOE Rule 2.51. In
order to conform the Bylaws, the Exchange wishes to similarly, relocate
this language to its rules, instead of maintaining it in its Bylaws.
Specifically, the Exchange proposes to adopt new Rule 15.2, which
language is based off CBOE Rule 2.51. The Exchange notes that this
provision is designed to preclude the Exchange from using its authority
to raise regulatory funds for the purpose of benefitting its
Stockholder. Unlike CBOE Rule 2.51 however, proposed Rule 15.2
explicitly provides that regulatory funds may not be distributed to the
stockholder. The Exchange notes that this language is currently
contained in Article X, section 4 of the current Bylaws. Additionally,
while not explicit in CBOE Rule 2.51, the Exchange notes that the rule
filing that adopted Rule 2.51 does similarly state that regulatory
funds may be not distributed to CBOE's stockholder.\56\ Although
proposed Rule 15.2 will differ slightly from CBOE Rule 2.51, the
Exchange wishes to make this point clear to avoid potential confusion.
Lastly, the Exchange notes that unlike Article X, Section 4 of the
current Bylaws, proposed Rule 15.2, like CBOE Rule 2.51, will provide
that notwithstanding the preclusion to use regulatory revenue for non-
regulatory purposes, in the event of liquidation of the Exchange,
Direct Edge LLC will be entitled to the distribution of the remaining
assets of the Exchange.
---------------------------------------------------------------------------

    \56\ See Securities Exchange Act Release No. 62158 (May 24,
2010), 75 FR 30082 (May 28, 2010) (SR-CBOE-2008-088).
---------------------------------------------------------------------------

     Certain sections in Article XI, including Section 2
(``Participation in Board and Committee Meetings''), Section 4
(``Dividends'') and Section 5 (``Reserves''). More specifically,
Article XI, Section 2 governs who may attend Board and Board committee
meetings pertaining to the self-regulatory function of the Exchange and
particularly, provides among other things, that Board and Board
Committee meetings relating to the self-regulatory function of the
Company are closed to all persons other than members of the Boards,
officers, staff and counsel or other advisors whose participation is
necessary or appropriate.\57\ Article XI, Section 4 provides that
dividends may be declared upon the capital stock of the Exchange by the
Board. Article XI, Section 5 provides that before any dividends are
paid out, there must be set aside funds that the Board determines is
proper as a reserves. The Exchange does not wish to include these
provisions in the proposed Bylaws as no equivalent provisions exist in
the CBOE Bylaws and the Exchange wishes to have uniformity across the
bylaws of the CBOE Holdings' U.S. securities exchanges.
---------------------------------------------------------------------------

    \57\ Article XI, Section 2 also provides that in no event shall
members of the Board of Directors of CBOE Holdings, Inc., CBOE V,
LLC or Direct Edge LLC who are not also members of the Board, or any
officers, staff, counsel or advisors of CBOE Holdings, Inc., CBOE V,
LLC or Direct Edge LLC who are not also officers, staff, counsel or
advisors of the Company (or any committees of the Board), be allowed
to participate in any meetings of the Board (or any committee of the
Board) pertaining to the self-regulatory function of the Company
(including disciplinary matters).

---------------------------------------------------------------------------

(c) Changes to Rules
    The Exchange will also amend its rules in conjunction with the
proposed changes to its bylaws. The proposed rule changes are set forth
in Exhibit 5E. First, the Exchange proposes to update the reference to
the bylaws in Rule 1.1. Next, the Exchange notes that in order to keep
the governance documents uniform, it proposes to eliminate the
definitions of ``Industry member'', ``Member Representative member''
and ``Director'' from Article I of the current Bylaws. The Exchange
notes that Industry members and Member Representative members are still
used for Hearing Panels pursuant to Rule 8.6. As such, the Exchange
proposes to relocate these definitions to the rules (specifically, Rule
8.6) and proposes to update the reference to the location of the
definitions in Rule 8.6 accordingly (i.e., refer to the definition in
Rule 8.6 as opposed to the definition in the bylaws). The Exchange also
proposes to eliminate language in Rule 2.10 that, in connection with a
reference to ``Director'', states ``as such term is defined in the
Bylaws of the Exchange''. As the definition of Director is being
eliminated in the Bylaws, the Exchange is seeking to remove the
obsolete language in Rule 2.10.
    Lastly, as discussed above, the Exchange proposes to add new Rule
15.2, which will provide that any revenues received by the Exchange
from fees derived from its regulatory function or regulatory fines will
not be used for non-regulatory purposes or distributed to the
Stockholder, but rather, shall be applied to fund the legal and
regulatory operations of the Exchange (including surveillance and
enforcement activities), or be used to pay restitution and disgorgement
of funds intended for customers (except in the event of liquidation of
the Exchange, which case Direct Edge LLC will be entitled to the
distribution of the remaining assets of the Exchange). As more fully
discussed above in the ``Eliminated Bylaw Provisions'' section, the
proposed change is similar to Article X, Section 4 of the current
Bylaws and based on Rule 2.51 of CBOE Rules.
    The Exchange believes that the proposed changes to the current
Bylaws and current Certificate would align its governance documents
with the governance documents of each of CBOE and C2, which preserves
governance continuity across each of CBOE Holdings' six U.S. securities
exchanges. The Exchange also notes that the Exchange will continue 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, as
required by Section 6(b)(1) of the Act.\58\
---------------------------------------------------------------------------

    \58\ 15 U.S.C. 78f(b)(1).
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with
the Act and the rules and regulations thereunder applicable to the
Exchange and, in particular, the requirements of Section 6(b) of the
Act.\59\ Specifically, the Exchange believes the proposed rule change
is consistent with the Section 6(b)(5) \60\ requirements that the rules
of an exchange be 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.
Additionally, the Exchange believes the proposed rule change is
consistent with the Section 6(b)(5) \61\ requirement that the rules of
an exchange not be designed to permit unfair discrimination between
customers, issuers, brokers, or dealers. The Exchange also believes
that its proposal is consistent with Section 6(b) of the Act in
general, and furthers the objectives of Section 6(b)(1) of the Act in
particular, in that it enables the Exchange to be so organized 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.
---------------------------------------------------------------------------

    \59\ 15 U.S.C. 78f(b).
    \60\ 15 U.S.C. 78f(b)(5).
    \61\ Id.
---------------------------------------------------------------------------

    The Exchange also believes that its proposal to adopt the Board and
committee structure and related nomination and election processes set
forth in the proposed Bylaws are consistent with the Act, including
Section 6(b)(1) of the Act, which requires, among other things, that a
national securities exchange be organized to carry out the purposes of
the Act and comply with the requirements of the Act. In general, the
proposed changes would make the Board and committee composition
requirements, and related nomination and election processes, more
consistent with those of its affiliates, CBOE and C2. The Exchange
therefore believes that the proposed changes would contribute to the
orderly operation of the Exchange and would enable the Exchange to be
so organized as to have the capacity to carry out the purposes of the
Act and comply with the provisions of the Act by its members and
persons associated with members. The Exchange also believes that this
proposal furthers the objectives of Section 6(b)(3) \62\ and (b)(5) of
the Act in particular, in that it is designed to assure a fair
representation of Exchange Members in the selection of its directors
and administration of its affairs and provide that one or more
directors would be representative of issuers and investors and not be
associated with a member of the exchange, broker, or dealer; and is
designed 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. For example, the number of Non-Industry Directors must
not be less than the number of Industry Directors. Additionally, the
Exchange believes that the 20% requirement for Representative Directors
and the proposed method for selecting Representative Directors ensures
fair representation and allows members to have a voice in the
Exchange's use of its self-regulatory authority. For instance, the
proposed Bylaws includes a process by which Exchange members can
directly petition and vote for representation on the Board.
---------------------------------------------------------------------------

    \62\ 15 U.S.C. 78f(b)(3).
---------------------------------------------------------------------------

    Additionally, the Exchange believes the proposed Certificate,
Bylaws and rules support a corporate governance framework, including
the proposed Board and Board Committee structure that preserves the
independence of the Exchange's self-regulatory function and insulates
the Exchange's regulatory functions from its market and other
commercial interests so that the Exchange can continue to carry out its
regulatory obligations. Particularly, the proposed governance documents
provide that Directors must take into consideration the effect that his
or her actions would have on the ability of the Company to carry out
its regulatory responsibilities under the Act and the proposed changes
to the rules includes the restriction on using revenues derived from
the Exchange's regulatory function for non-regulatory purposes,

which further underscores the independence of the Exchange's regulatory
function. The Exchange also believes that requiring that the number of
Non-Industry Directors not be less than the number of Industry
Directors and requiring that all Directors serving on the ROC be Non-
Industry Directors would help to ensure that no single group of market
participants will have the ability to systematically disadvantage other
market participants through the exchange governance process, and would
foster the integrity of the Exchange by providing unique, unbiased
perspectives.
    Moreover, the Exchange believes that the new corporate governance
framework and related processes being proposed are consistent with
Section 6(b)(5) of the Act because they are substantially similar to
the framework and processes used by CBOE and C2, which have been well-
established as fair and designed to protect investors and the public
interest.\63\ The Exchange believes that conforming its governance
documents based on the documents of the CBOE and C2 exchanges would
streamline the CBOE Holdings' U.S. securities exchanges' governance
process, create equivalent governing standards among the exchanges and
also provide clarity to its members, which is beneficial to both
investors and the public interest.
---------------------------------------------------------------------------

    \63\ See e.g., Securities Exchange Act Release No. 62158 (May
24, 2010), 75 FR 30082 (May 28, 2010) (SR-CBOE-2008-088); Securities
Exchange Act Release No. 64127 (March 25, 2011), 76 FR 17974 (March
31, 2011) (SR-CBOE-2011-010); and Securities Exchange Act Release
No. 80523 (April 25, 2017), 82 FR 20399 (May 1, 2017) (SR-CBOE-2017-
017).
---------------------------------------------------------------------------

    To the extent there are differences between the current CBOE and C2
framework and the proposed Exchange framework, the Exchange believes
the differences are reasonable. First, the Exchange believes it's
reasonable to provide that in Run-Off Elections, each Exchange Member
shall have one (1) vote for each Representative Director position to be
filled that year instead of one vote per Trading Permit held, because
the Exchange, unlike CBOE and C2, does not have Trading Permits and
because other exchanges have similar practices.\64\ The Exchange
believes it's also reasonable not to require the establishment of an
Advisory Board, as the Exchange desires flexibility in maintaining such
a Committee, and is not statutorily required to maintain such a
committee. Additionally, the Exchange notes that it currently does not
have an Advisory Board. Lastly, the Exchange notes that it is
reasonable to not require a standing exchange-level Appeals Committee
because the Board still has the authority to appoint an Appeals
Committee in the future as needed pursuant to its powers under Article
IV, Section 4.1 of the proposed Bylaws and because an Appeals Committee
is not statutorily required.
---------------------------------------------------------------------------

    \64\ See e.g., Amended and Restated By-Laws of Miami
International Securities Exchange, LLC, Article II, Section 2.4(f).
---------------------------------------------------------------------------

    Finally, the proposed amendments to the rules as discussed above
are non-substantive changes meant to merely update the Rules in light
of the proposed changes to the current Bylaws and to relocate certain
provisions to better conform the Exchange's governance documents to
those of CBOE and C2.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe the proposed rule change will impose
any burden on competition not necessary or appropriate in furtherance
of the purposes of the Act. The proposed rule change relates to the
corporate governance of EDGA and not the operations of the Exchange.
This is not a competitive filing and, therefore, imposes no burden on
competition.

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

    The Exchange neither solicited nor received 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 proposal 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 email to<EMAIL_ADDRESS>Please include
File No. SR-BatsEDGA-2017-22 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 No. SR-BatsEDGA-2017-22. 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 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
10:00 a.m. and 3:00 p.m. Copies of the filing will also 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 No. SR-BatsEDGA-2017-22 and should be
submitted on or before September 27, 2017.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\65\
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    \65\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-18790 Filed 9-5-17; 8:45 am]
 BILLING CODE 8011-01-P